Integrated energy major Royal Dutch Shell plc RDS.A and Japanese oil firm Inpex Corporation remain committed to proceed with the construction of Indonesia's onshore Masela liquefied natural gas (LNG) plant. However, the companies will be requiring additional time to reformulate their plan of development.
Around six months ago, the companies had jointly proposed to build a huge floating facility to exploit the Masela gas block, located in the Arafuru Sea, Maluku. However, this offshore plan worth $14.8 billion suffered a massive blow when Indonesia's president rejected the proposal in favor of an onshore plant, citing economic benefits for the nation.
The Indonesian government officials also supported an onshore plant to maximize regional development in the Maluku region. Moreover, given that the project is expected to have a duration of around 10 years and will be requiring funding in large amounts, the government wants to do the construction onshore in order to benefit both regional and national economies. However, Shell and Inpex will have to bear the brunt of the new onshore project, which is expected to add up to $7.5 billion to the cost.
The Masela project plan was developed after the signing of a production sharing contract in 1998. The first development plan was approved with total gas reserves of 6.97 trillion cubic feet (tcf) by the Energy and Mineral Resources Ministry. The Masela block is situated 180 kilometers away from the nearest islands – Selaru and Yamdena – in the Tanimbar Islands, and 600 kilometers away from Wamar Island in Aru Islands.
Headquartered in The Hague, Netherlands, Shell is one of the largest integrated oil and gas companies in the world. It explores for and extracts crude oil, natural gas and natural gas liquids. It has interests in chemicals as well as in power generation and renewable energy.
Shell currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Some better-ranked stocks in the broader energy sector are Braskem S.A. BAK, OMV Aktiengesellschaft OMVJF and Vanguard Natural Resources, LLC VNR. All these stocks sport a Zacks Rank #1 (Strong Buy).
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