ExxonMobil has decided that it "no longer wishes to continue further discussions or activity" regarding the East Natuna natural gas block offshore Indonesia, after having assessed the future development prospects and costs, a senior manager at Exxon's Indonesian unit told Reuters in an email on Tuesday.
The East Natuna gas block is thought to be home to the world's largest reserves of untapped gas.
Exxon has decided not to proceed with plans and talks to take part in the planned development of the field, Exxon Indonesia's Vice President of Public and Government Affairs Erwin Maryoto told Reuters.
Back in 1980, Exxon signed a Production Sharing Contract (PSC) for East Natuna block in the South China Sea. Resource is estimated to contain around 222 trillion cubic feet of wet gas with almost 46 trillion cubic feet of recoverable hydrocarbon gas, according to Exxon.
In August 2012, a consortium comprising Exxon's affiliate Esso Natuna, PT Pertamina (Persero), and PTT Thailand signed a restated principles of agreement (POA) with the Indonesian government for a new PSC to develop East Natuna. In December 2015, Indonesia's government agreed to extend the POA for 30 months, to allow for more time for assessment of the global market conditions and technology for the resources.
The government has received a letter from Exxon on its decision not to proceed with involvement in the gas block, Reuters quoted Wiratmaja Puja, director general of oil and gas at the energy ministry, as telling reporters today.
Related: Significant Draw In Crude Inventories Jolts Oil Prices
The development of the block will be "uneconomical for the company under current terms", Exxon said in its letter, according to the government official.
Under the current terms, developing the project would make its gas much more expensive than the spot LNG prices in Asia, according to Puja. Indonesia intends to invite Exxon to renegotiate the project terms, and might add "a special incentive" to a possible renewed offer to make the project economically feasible, the government official said, as quoted by Reuters.
Pertamina, on the other hand, is committed to developing the project, but it needs a partner to do so, Pertamina's upstream director Syamsu Alam told Reuters. The project's development is said to cost up to US$40 billion.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More