Indonesian LNG projects face delays to 2020 and later: govt official

[SINGAPORE] Three major liquefied natural gas (LNG) export projects in Indonesia face delays due to lower oil prices and regulatory hurdles, which will push first shipments back to 2020 or later, a government official said on Wednesday.

Production at the Abadi LNG development, operated by Japan's Inpex with Royal Dutch Shell as minority partner, will begin in 2022, three years later than planned, said Widhyawan Prawiraatmadja, a special adviser to the Indonesian minister of energy and mines.

The delays may alter the market outlook for LNG towards the end of the decade, when a wave of new Australian production is expected to add to the current oversupply that has already more than halved Asian spot prices since last year.

Indonesia plans to start up several LNG export terminals by the end of the decade and the government has attracted energy majors including Chevron Corp, BP PLC and Total SA as investors. "Some delays are unavoidable," Mr Prawiraatmadja said at the LNG Supplies for Asian Markets conference in Singapore, adding that the projects faced "a very difficult situation with lower oil prices".

A final investment decision (FID) on expansion of the BP-led Tangguh project will be made this year, allowing a third LNG train at the plant to begin shipments in 2020, one year later than planned, Prawiraatmadja said.

He also said the target for full operation of the Indonesia Deepwater Development (IDD), a $16.4 billion ultra-deepwater project led by Chevron Corp, would be delayed by a year to 2020.

Chevron took FID on the first stage of the IDD project - the Bangka field - late last year but delayed a decision on the second stage - the Gendalo and Gehem fields - while it reassessed its development plans.

Delays at the Abadi and IDD projects were partly a result of the companies' need to re-submit their proposals for development as volumes from the projects would be larger than initially thought, Mr Prawiraatmadja said.

Falling gas prices have put LNG export projects worldwide under heavy cost pressure and have even led to cancellations as expected returns on investment have to be revised down along with prices.

Lower LNG production and rising domestic demand have already forced Indonesia to export less LNG and instead redirect shipments to new domestic import terminals.

Indonesia's gas demand is forecast by state energy regulator SKKMigas to grow by 9 per cent a year in the coming five years, according to Mr Prawiraatmadja.

REUTERS