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ollowing the government'€™s decision for an onshore development of the gas-rich Masela block, the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) has paved the way for state-owned oil and gas company Pertamina to take part in the project.

Amien Sunaryadi of SKKMigas said that the agency had facilitated a meeting between Masela'€™s contractors and Pertamina to discuss the possibility of cooperation on the block'€™s development.

'€œSKKMigas arranged a meeting between Inpex and Pertamina to discuss the possibility of Pertamina working on the Masela block. The discussion revolved around a strategic alliance because the domestic market needs the gas,'€ Amien said.

Inpex holds a 65 percent interest in the block, while the remaining 35 percent is held by Shell.

Amien did not reveal any further details of Pertamina'€™s possible involvement. However, he said that each party had appointed someone to follow up on the initial discussion.

Masela is seen as a strategic asset in the country because it is estimated to have 10.73 trillion cubic feet in reserves, a larger figure than the Mahakam gas block, the country'€™s biggest block at present. Gas production from Masela, which is located in the Arafura Sea, is projected to be able to last for more than 20 years.

Pertamina president director Dwi Soetjipto welcomed the regulator-initiated meeting.

'€œIn the meeting, Inpex gave an opportunity for Pertamina to study Masela. There will be a further discussion with both Inpex and Masela about what percentage Pertamina can get,'€ Dwi said.

Dwi added that Pertamina had expressed its interest in a 20 percent stake in Masela.

'€œOf course, we expect to have an interest before the expiry of the contract. However, all things depend on Inpex and Masela,'€ Dwi added.

As part of attempts to establish energy security in the country, the government gives Pertamina priority to take over oil and gas blocks that have expired from previous operators. As the Masela production sharing contract (PSC) will only expire in 2028, Pertamina'€™s involvement in Masela can only be performed under a business-to-business basis.

Inpex representatives declined to comment on the issue.

Masela contractors recently suffered blow from the government after their plan of development (POD) proposal to develop the block under a floating liquefied natural gas (LNG) scheme was turned down by President Joko '€œJokowi'€ Widodo. Jokowi has ordered that the block be developed under an onshore basis, arguing that such a development would bring more benefit to local economy.

Inpex and Shell actually obtained approval for the floating POD in 2010 from the previous government. However, it submitted last year a revision of the POD to adjust upward the offshore LNG production capacity to 7.5 million tons per year from its earlier plan.

Controversy over the offshore project emerged after Coordinating Maritime Affairs Minister Rizal Ramli criticized the POD, saying building plants on nearby islands '€” located hundreds of kilometers from the blocks '€” would bring more benefit to the country.

An internal rift between Rizal and Energy and Mineral Resources Minister Sudirman Said, who defended the contractors'€™ offshore scheme, erupted into the public.

'€œThe President believes that an onshore scheme will generate larger multiplier effects. As a minister, I have to follow. It is time to move on and stop this foolishness,'€ Sudirman said.