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Indonesia energy ministry still assessing PoD of Masela Block

Tangguh LNG project in West Papua

JAKARTA ( – The Special Task Force for Upstream Oil and Gas Business (SKK Migas) said it is still assessing the plan of development (PoD) phase I of the giant offshore Masela Block.

The development of Abadi Field in the Masela Block has been delayed for years after the Joko Widodo government changed the production facilities location from offshore to onshore. This prompted Inpex Corp, the operator of Masela Block, to revise the PoD.

Given the changes, Inpex has negotiated with the Energy and Mineral Resources Ministry to extend the production sharing contract (PSC) of Masela Block beyond 2028.

The other points of negotiation is the compensation for the period of the loss time due to the change of location. The government wants the compensation to be seven years, while Inpex wants it 10 years. In addition, the government wants the capacity of the LNG plant, while Inpex proposed 9.5 mtpa.

The government also wants the volume of gas pipe to be raised to 475 MMSCFD, while Inpex insists of 150 MMSCFD.

The other point of the discussion is the location of the onshore LNG plant. The Indonesian government wants the LNG plant facilities to be built in the Aru Island, while Inpex wants the facilities to be located in the Tanimbar Island. As for rate of return (RR), the government wants the RR to be set at 12% p.a, compared to 15% proposed by Inpex.

Currently, Inpex holds 65% stakes in the Masela Block, and the remaining 35% is held by Shell Upstream Overseas Services (35%). There is no local owner of the block after PT Energy Mega Persada, a member of Bakrie Group sold its participating interest in the Masela Block.

The Head of SKK Migas Dwi Soetjipto said the discussion on the PoD of Masela Block is still going on. Inpex, he said, is still committed to develop the Abadi Field within the Masela Block.

The debate over the location of the production facilities could be headache as there could certain parties who could take advantage of the situation by acquiring the land plot that could become the location of production facilities.

Learning from the land clearance process for the Cepu Block, the land issue for the location of LNG plant onshore production facilities of Masela Block could take years.

As for the location of the production facilities, recently,  the Head of Tanimbar Island Regency, in the Maluku Province has identified a plot of land with total size of 1,500 hectares that would be used by Inpex Corp to develop Masela Block onshore LNG processing plant, increased from an initial plan of 600 hectares.

Tanimbar Islands Regency Head Petrus Fatlolon made the above statement after holding a discussion with the Tanimbar Islands Regency Head, representatives of Maluku Provincial government, the Ministry of Agrarian Affairs and Spatial Planning, SKK Migas and Inpex in Saumlaki on Jan. 30, 2019.

The meeting was an effort to speed up the development of the Masela Block project facilities.

Fatlolon has said the land plot for the project would be located in the South Tanimbar subdistrict, however, the exact location is yet to be determined.

The development of Masela Block has been delayed after the Joko Widodo government instructed Inpex to build an onshore LNG plant, instead of an offshore LNG plant in the form of floating LNG (FLNG).

The decision has prompted Inpex to re-submit the PoD of the block development. The PoD of the project is being prepared by Inpex.

At present the ministry, in this case, the Special Task Force for Upstream Oil and Gas (SKK Migas) is evaluating the Pre-Front End Engineering Design (Pre-FEED) of the Abadi Field in Masela Block. Once Pre-FEED is approved, the operator can move ahead with PoD.

Earlier, KBR, Inc (NYSE:KBR), a global EPC company has been awarded a pre-FEED contract by INPEX Corporation through its subsidiary INPEX Masela Ltd for the Abadi onshore LNG Project in the Arafura Sea in Indonesia. (*)

By Roffie Kurniawan

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