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Indonesia govt hints of extending Inpex’ Masela block contract

JAKARTA (Rambu Energy) – The Indonesian government has signaled that it would extend Inpex Corp contract to develop the giant Masela Block.

On Monday (Dec. 15) Vice President Jusuf Kalla said he agrees if the government extends Inpex contract in developing the block, given the limited time for the operator to recover their investment in the block.

“Their contract to operate the block will expire in 2028, however, they would only start producing in 2022. Six years are not enough, right?” Jusuf Kalla told reporters after receiving courtesy call of Inpex Corp top executives at his office, as reported by Bisnis Indonesia.

The Inpex executives gave an update to the VP Jusuf Kalla of the development of Block Masela block in Arafura Sea, Maluku.

Jusuf Kalla said he was given a report by Inpex that the Floating Liquefied Natural Gas (FLNG) that will process natural gas in the Abadi Field, within Masela Block would only begin in 2022, or six years before their contract to operate the block expires.

This limited production phase has encouraged Inpex to secure early government guarantee to extend the contract beyond 2028.

Initially, Inpex targeted to commence production of the Abadi field in 2018. However, it was then delayed to 2019 and now it is further delayed to 2022.

Under the existing regulation, a Production Sharing Contract (PSC) holder is only allowed to submit extension request 10 years before the contract expires, meaning that Inpex is only allowed to seek for extension in 2019.

The government is now trying to find ways to make a breakthrough so that the contract for such massive project is given an extension much earlier than 10 years.

Inpex Corp said recently that it has yet to make final investment decision (FID) of the Abadi Field within Masela Block, pending on the approval of the plan of development (POD) of the field by the Indonesian government. The delay of FID means that the commercial operation of the Abadi field project will be delayed from initial plan of 2018.

Under the phase one POD, Inpex plans to produce 2.5 million tons per year of LNG and 8,400 barrels of condensate per day.

Inpex secured a 30-year production sharing contract for the Masela block in 1998. The existing contract will expire in 2028.

Masela Block is estimated to have 18.47 trillion cubic feet of proved and probable gas reserves. The Abadi field project is one of the largest gas projects being developed in Indonesia. Inpex, along with its partner Shell, is expected to spend over US$5 billion to develop the fied. (*)

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