State energy firms Pertamina and Petronas plan to jointly take over Shell's participating interest in Indonesia's Masela gas project, the Indonesian energy minister said on Monday.
Shell has been seeking to divest its 35% share in Masela and Indonesian authorities are keen for the companies to complete the deal to move the project forward after years of delay.
"They are both doing the negotiation," Energy Minister Arifin Tasrif told Reuters, referring to Indonesia's Pertamina and Malaysia's Petronas.
"They have to finalize what kind of joint scheme they are preparing," he said on the sidelines of the Energy Asia conference in Kuala Lumpur, being hosted by Petronas.
A Shell spokesperson said the company could not comment on ongoing portfolio activity, while Petronas did not immediately respond to a request for comment.
Indonesia has seen sluggish oil and gas production in recent years due to depleting blocks, while some major new projects, such as Masela and Indonesia Deepwater Development (IDD), are facing delays as majors such as Shell and Chevron Corp exit projects as part of their global strategy.
Time is ticking for Indonesia to tap its massive hydrocarbon reserves even as countries worldwide move towards non-fossil fuels to reduce emissions.
Malaysian Prime Minister Anwar Ibrahim said at the event that hydrocarbons will be an important part of Southeast Asia's energy mix and achieving net-zero emissions targets should not come "at the expense of economic growth or vice versa".
Pertamina and Petronas are preparing for a sales agreement with Shell, Arifin said, adding that he hoped a deal would be settled within a month.
Earlier this month, Pertamina's CEO said it was finalizing a Masela project deal.
The project is led by Japan's Inpex, which has a 65% stake. It was designed to have an annual LNG production volume reaching 9.5 million metric tons at its peak.
Earlier this year, Inpex submitted a revised development plan to include carbon capture and storage.
Separately, on the IDD gas project, Arifin said that Italy's Eni has been in discussion to take over Chevron's stake in the project "for a long time". The government expects negotiations over operation of the project to be concluded in July, he added.
Eni, already a partner in the project, has previously declined to comment on the possibility of taking Chevron's stake. Located in Makassar Strait, IDD is 62% controlled by Chevron.
In the South China Sea, Indonesia this year has approved a $3 billion development plan for the Tuna gas field, which is operated by Premier Oil Tuna, a unit of London-listed Harbour Energy.
Harbour has said sanctions from the European Union and Britain have impacted Tuna's development plan as the block is partly controlled by Russia's Zarubezhneft.
"Now Premier has to carry on on their own first, while seeking for new partners to replace the previous one," Arifin added, referring to Zarubezhneft.
(Reporting by Emily Chow, Writing by Fransiska Nangoy; Editing by Robert Birsel and Himani Sarkar)