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Inpex to start works for Masela plan
After protracted negotiations and politically-driven changes in the development plan, Japanese oil and gas firm Inpex Corp
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fter protracted negotiations and politically-driven changes in the development plan, Japanese oil and gas firm Inpex Corp. has reiterated its readiness to soon kick off preparation works in the gas-rich Masela block.
Inpex CEO Toshiaki Kitamura expressed this commitment during a meeting with Energy and Mineral Resources Minister Ignasius Jonan in Tokyo, Japan, on Tuesday, according to a press statement issued by the ministry.
The response came up after Jonan called on Inpex to start discussions with the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), so that the process of the pre-front end engineering design (pre-FEED), which comprises of the production capacity and onshore liquefied natural gas (LNG) plant location, can begin soon, the statement said.
The location of the plant has been a point of contention since President Joko “Jokowi” Widodo demanded the project be developed onshore rather than offshore, as initially planned.
However, Jonan confirmed that Inpex, which has a 65 percent share in the block, could pick one of three islands, namely Selaru, Aru or Yamdena in Maluku.
“The government does not have any preference on the location,” Jonan said, adding that the two parties had agreed to determine the site after the pre-FEED completion.
The project has been in the spotlight since the President decided last March that it must be carried out according to an onshore scheme on considerations of greater multiplier effects on the regional economy, particularly job creation, such as through the construction of petrochemical and fertilizer plants nearby.
The earlier offshore scheme, however, would have allowed the gas field to commence production as well as operations sooner, namely by 2024 and 2026, respectively, just two years shy of the expiration of the contracts of Inpex and its partner, Royal Dutch Shell.
To compensate for the potential loss of time caused by the scheme’s revision, the government has promised an additional seven years to their contracts and considered Inpex’s request for cost recovery worth US$1.2 billion following an audit.
The two contractors originally submitted their plan of development (POD) for an offshore scheme in 2010, but the discovery of larger reserves led both to submit a revised POD last year to adjust the floating LNG plant capacity to 7.5 million tons per year (mtpa), up from 2.5 million tons.
The government has officially offered them two options for the LNG plant capacity, namely 7.5 mtpa with 474 million standard cubic feet of pipe gas per day (mmscfd) or 9.5 mtpa with 160 mmscfd.
Located in Indonesia’s eastern province of Maluku, the gas-rich Masela block is estimated to produce 1,200 mmscfd and 24,000 barrels of condensate each day for 24 years.
The project is expected to cost a maximum US$16 billion, much less than the $22 billion estimated previously.
However, the negotiations dragged on even after Japanese Prime Minister Shinzo Abe met with Jokowi in January.
Following the apparent standstill, Jonan threatened to revoke the production-sharing contract (PSC) if the contractors fail to conduct a pre-FEED in the near future.
Separately, Inpex spokesman Usman Slamet told The Jakarta Post that the firm kept its target to execute the project in the most economically and technically feasible way.
