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Government gives Inpex extra 20 years
The government has assured Japan’s Inpex Corp
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he government has assured Japan’s Inpex Corp. that the firm will receive another 20 years to operate the gas-rich Masela block after its contract expires in 2028.
Although the block is touted to have one of Asia’s largest gas reserves, its development has been held up for several years because of government in-fighting over whether a planned liquefied natural gas (LNG) plant would be located onshore or offshore.
In its latest attempt to wet the investor’s appetite, Energy and Mineral Resources Minister Ignasius Jonan gave the assurance to Inpex CEO Toshiaki Kitamura during a meeting in Tokyo earlier this week.
“With this decision on Inpex made, we will extend Inpex’s contract for another 20 years as it is coming to an end. This is in addition to the seven years we have already granted the company to compensate for the change in the LNG development plan from an offshore scheme to an onshore scheme,” Jonan said in statement on Thursday.
The project garnered the public’s attention after President Joko “Jokowi” Widodo decided last March that the block would be developed under an onshore scheme instead of an offshore scheme as previously planned.
He considered that the former would bring more benefits to the local economy by way of job creation and industrial growth through the construction of petrochemical and fertilizer plants.
Under the offshore scheme, the plan of development (POD) estimated that the gas field could start production by 2024 and operation by 2026, just two years shy of the contract’s expiration date.
The government has since promised extra time of seven years for Inpex, Japan’s largest energy developer, and its partner, Royal Dutch Shell Plc., to compensate for the time lost and has given strong consideration to Inpex’s request for a cost recovery worth US$1.2 billion.
The two contractors originally submitted their POD for an offshore scheme in 2010, but the discovery of larger reserves led them to submit a revised POD two years ago, tripling the capacity of the floating LNG plant to 7.5 million tons per year (mtpa).
However, the government recently gave the nod to Inpex and Shell to conduct a pre-front end engineering design (FEED) for a much greater capacity of 9.5 mtpa, in addition to piped gas of 150 mmscfd. Moreover, Jonan also explicitly said that the contractors had free reign to choose the location of the LNG plant.
Separately, representatives from Inpex declined to comment on the government’s approval of a 20-year contract extension.
“We are aware of the media reports. Nevertheless, as we continue to be engaged in discussions with the Indonesian government regarding the extension of the Masela PSC [production-sharing contract], we are not in a position to elaborate the details,” Inpex’ senior media relations specialist, Moch. N. Kurniawan, told The Jakarta Post in a short message.
Located in Indonesia’s eastern province of Maluku, Masela block is estimated to be able to produce 1,200 million standard cubic feet of gas per day (mmscfd) and 24,000 barrels of condensate each day for 24 years.
The government expects the total capital expenditure of the project to reach a maximum $16 billion only, much less than the $22 billion initially estimated.
However, negotiations have continued to stretch on after Japanese Prime Minister Shinzo Abe met with Jokowi in January. The government’s impatience was evident following Jonan’s threat to revoke the PSC if the contractors failed to conduct a pre-FEED in the near future.
