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Jakarta Post

National interests rule in gas-rich Masela block

  • Bagus BT Saragih and Amahl S. Azwar

    The Jakarta Post

Jakarta   /   Thu, September 19, 2013   /  11:14 am

The chief executive officer (CEO) of Inpex Corporation on Wednesday met President Susilo Bambang Yudhoyono, and demanded that the Japanese oil company be given a contract extension in the gas-rich Masela block, in the Arafura Sea, south of Papua.

The Japanese oil company that won the 30-year production-sharing contract (PSC) for the Masela block in 1998 will see the contract expire in 2028.

With 15 years to go, visiting Inpex CEO, Toshiaki Kitamura, wants the Indonesian government to guarantee the future of his company in the block.

'€œWe will assess whether we can give [Inpex] an extension until 2048. The existing contract will expire in 2028,'€ Energy and Mineral Resources Minister, Jero Wacik, said after the meeting.

'€œWe must guarantee that our national interest is secured if we choose to give them an extension.'€

Jero, who accompanied the President in the closed-door meeting, said that Yudhoyono and Kitamura discussed Inpex'€™ Masela project, highlighting the project would be Inpex'€™s biggest one as it was '€œtimeless.'€

'€œKitamura said Inpex started the exploration in the block when it was nothing. The President insisted that the project must provide benefit for the Indonesian people. Inpex could benefit but Indonesia must benefit more,'€ he said.

The Masela block is estimated to have 18.47 trillion cubic feet of proved and probable gas reserves as certified by DeGolyer & MacNaughton Consultants from Texas in the US. However, the first production from the block, anticipated from its Abadi field, will only begin in 2018.

So, even though the Abadi field is projected to produce 335 million standard cubic feet per day (mmscfd) and 8,400 barrel per day (bpd) of condensates in 2018, Inpex is estimated to reach its break-even point only after 2028 as the Japanese firm plans to invest US$14 billion for the project.

On the other hand, according to a government regulation published in 2004, an oil and gas contractor is only allowed to propose an extension for its contract 10 years before it expires.

Separately, the Energy and Mineral Resources Ministry'€™s director general for oil and gas, Edy Hermantoro, said the government would likely approve Inpex'€™s bid for contract extension, citing that the move would encourage the firm'€™s long-term investment for the project but declined to give details.

In addition, Jero said Kitamura also mentioned the production-sharing contract at the gas-rich Mahakam block in East Kalimantan, which would expire in 2017.

'€œKitamura proposed a post-2017 scheme in the block. The government has been evaluating all the options and is looking for the one with the greatest benefit for Indonesia,'€ he said, refusing to go into detail.

French oil and gas contractor Total E&P Indonesie is the operator of the Mahakam block.

Last month, French Foreign Minister Laurent Fabius met his Indonesian counterpart Marty Natalegawa and Minister Jero in Jakarta, which many saw was part of Total'€™s bid to extend its Mahakam contract.

State-owned oil and gas company Pertamina has been said to be attempting to take over the whole Mahakam production concession while Total has offered a sharing partnership with the Indonesian firm in a bid to retain French shares in the rich oil-and-gas field after 2017.

Meanwhile, in his statement, Kitamura said the Tokyo-listed energy giant reiterated its commitment to develop the Abadi field. The firm planned to conduct offshore drilling in the Masela block into three delineated wells called Abadi-8, Abadi-9 and Abadi-10 as well as one exploration well, Berkat-1.

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