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JAKARTA (RambuEnergy.com) – The Indonesian Energy and Mineral Resources Ministry will grant 20 years extension to Inpex Corp of Japan to develop giant Masela Block in the Arafura Sea. The move is aimed at giving assurance to Inpex for long term investment in the block.
In addition, Inpex also get additional 7 years as a compensation to change the scheme to develop production facilities from offshore to onshre. As a result, Inpex would develop the Masela block until 2055.
The Indonesian energy minister Ignasius Jonan made the statement during his visit to Japan late last week to attend an LNG conference. He also met with CEO of Inpex Corp Toshiaki Kitamura in Tokyo.
“With regard to Inpex decision, (the Indonesian government) will grant 20 years of extension to Inpex as its contract (to develop the block) will soon expire. Plus 7 years as a compensation to change the scheme to develop the LNG plant to onshore from offshore,” Minister Jonan said after meeting with Toshiaki Kitamura.
Another important decision is to give flexibility to Inpex to choose the onshore location where it will built an LNG plant.
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.
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, after the Joko Widodo government instructed Inpex to build onshore LNG plants, instead of offshore Floating LNG (FLNG).
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.
Given huge amount of investment, the limited production phase has encouraged Inpex to secure early government guarantee to extend the contract beyond 2028.
Pre-FEED
At present, Inpex is conducting pre-front end engineering (pre-FEED) phase. The LNG plant is to be designed to have capacity of 9.5 millon tons per annum (MTPA) and gas pipe of 150 MMSCFD.
The Pre-FEED is an important phase as it re-formulate the plan of development (PoD) of the LNG development.
Masela block PSC contract was signed in 1998 by Inpex. Currently Inpex owns 65% participating interest, with the remaining 35% owned by Shell Upstream Overseas Services. Pertamina has expressed interest to purchase stakes in the block. (*)
Written by Roffie Kurniawan (roffie.kurniawan@gmail.com)
