As per the Indonesian authority, European oil giant
Royal Dutch Shell Plc
) and associate Japanese firm Inpex Corporation will invest
approximately $12 billion in the development of the natural gas
offshore block - Masela - in the Arafura Sea.
However, the companies' investment could go over $20 billion in
an attempt to enhance the production capacity of the Abadi
liquefied natural gas (LNG) facility in the Masela block. However,
Shell has yet to confirm the financial aspects of this
Shell and its partners have designed a development plan for the
block that includes Indonesia's first floating liquefied natural
With an initial annual production capacity of 2.5 million tons,
the facility is expected to commence operations by 2018-2019. Shell
will remain committed to boost the capacity of the floating LNG
plant to 6 million metric tons per year.
Shell controls a 30% interest in the Masela block - acquired
from the operator Inpex Corporation in 2011. Inpex currently holds
a 60% stake. The remaining 10% is with Indonesia's PT Energy Mega
With the success of the project, this will be one of the largest
ever foreign investments in the Indonesian energy sector. The
country's vast untapped resources have become an attractive
investment option for many global oil and gas players.
Royal Dutch Shell is one of the largest integrated energy firms
in the world with a strong and diversified portfolio of development
projects that offer attractive long-term opportunities.
Shell, which operates in the industry with big players such as
), currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Longer-term, we are maintaining our Neutral
recommendation on the stock.
The company - renowned for its success in bringing some of the
largest and technically challenging capital-intensive projects to
fruition - is expected to continue accelerating revenue and
earnings growth over the next few quarters.
However, being one of the largest integrated oil and gas
companies in the world, Shell is particularly susceptible to the
downside risk from the current turmoil in the global economy. We
are also concerned about the group's high level of capital
spending, which may result in reduced returns going forward.
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