INDONESIA’S Pertamina and Malaysia’s Petronas signed an agreement with Shell on Tuesday (Jul 25) to buy its 35 per cent stake in the Masela natural gas fields for up to US$650 million, moving the project forward after years of delay.

Pertamina Hulu Energi will take 20 per cent and Petronas Masela will take 15 per cent in the project, the companies said at a signing ceremony at the Indonesia Petroleum Association conference.

The base consideration for the sale is US$325 million with a contingent amount of US$325 million to be paid when the final investment decision is taken on the Abadi liquefied natural gas (LNG) project, Shell said in a statement.

Abadi LNG, led by Japan’s Inpex, will use gas from the Masela fields to produce 9.5 million metric tons per year of LNG at its peak.

The transaction should be completed in the third quarter, subject to several conditions, including regulatory approval from Indonesia’s Ministry of Energy and Mineral Resources, Shell added.

“The decision to sell our participation in the Masela PSC is in line with our focus on disciplined capital allocation,” said Zoe Yujnovich, Shell’s integrated gas and upstream director.

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Pertamina CEO Nicke Widyawati said in a statement that purchase of the stake in the Abadi Field in Masela Block was intended to ensure adequate oil and gas supply for national energy needs.

She touted the experience of upstream unit Pertamina Hulu Energi in the exploration, development and production of gas fields, including in its operation of the Badak LNG plant.

Indonesia’s energy minister told Reuters last month that Petronas and Pertamina had planned to take over Shell’s stake in Masela.

Indonesia’s oil and gas production has declined in recent years because of depleting blocks, while some major new projects, such as Masela and Indonesia Deepwater Development, are facing delays as majors such as Shell and Chevron exit projects as part of changes to their global strategy. REUTERS