Inpex has signed heads of agreement (HOA) for the $20bn Abadi LNG Project, which involves developing the Abadi gas field in the Masela Block located in the Arafura Sea in Indonesia.

The agreement was signed with Indonesian authorities on behalf of the contractors with the endorsement of Shell Upstream Overseas on the basic principles with regard to a revised plan of development (POD) for the project.

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Inpex president Takayuki Ueda told reporters that the HOA includes an extension of the company’s contract to operate the Masela field by 27 years until 2055. As part of the project, onshore LNG plant, gas pipeline, and offshore facilities will be constructed.

The HOA acknowledges an agreement signed between the parties of a revised POD that is ‘economically competitive’. Following the agreement, Inpex will now start the process of submitting the revised POD for approval, as well as amending and extending the production sharing contract (PSC) for Masela Block.

Ueda said: “The execution of the heads of agreement, which follows a series of constructive discussions with the Indonesian government, positions the Abadi LNG Project as an economically competitive project by international standards.”

The company said that it will make the necessary preparations to start front end engineering and design (FEED) work in partnership with Shell after securing approval of the revised POD and reaching an agreement with the authorities on the PSC amendments and extension.

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Shell Venture Development executive vice-president Clare Harris said: “The heads of agreement is a significant milestone in the development of the Abadi project, an important economic opportunity for Indonesia.”

The project is expected to produce about 9.5 million tonnes of LNG annually and will provide significant contributions to Indonesia.