The Jakarta Post
The Energy and Mineral Resources Ministry has pledged a 10 percent participating interest (PI) to Maluku province in the management of the gas-rich Masela block.
The ministry's director general for oil and gas, IGN Wiratmaja Puja, said Wednesday that a letter outlining the government's commitment to allocating the participating interest for Maluku administration had been issued.
'In a letter sent by Energy and Mineral Resources Minister to the Maluku governor, the government expressed its commitment to giving a 10 percent PI to Maluku. Official approval will be made after the revision of the first plan of development is approved,' Wiratmaja said.
The commitment follows a recently issued ministerial regulation stating that city-owned enterprises may own up to 10 percent of oil and gas blocks on which contracts are about to expire.
Wiratmaja also signaled that the central government would likely allow state-owned Pertamina to own part of Masela should the company submit a proposal.
'Pertamina can lodge a request with the government for an up to 15 percent stake in working areas of which the contract will be extended,' Wiratmaja said.
The new ministerial decree also stipulates a 15 percent stake allocation for Pertamina.
According to the prevailing regulation, any block operator may apply for a contract extension 10 years at the earliest before the contract expires.
However, the Masela block operator, Inpex, has reportedly requested an early extension despite the Masela block contract not expiring until 2028, citing profitability reasons.
According to Government Regulation No. 35/2004 on oil and gas upstream businesses, an exception and early extension may be granted as long as the contractor has a gas-selling agreement.
Inpex currently holds a 65 percent stake in the Masela block, while the remaining 35 percent is owned by Shell.
The contract for the Masela block, which is located in the Arafura Sea, was granted in 1998 after an open bid held by the government. Under its initial plan of development, Inpex will develop a floating liquefied natural gas (LNG) facility with a 2.5 million tons per year capacity.
In a development earlier this year, a higher amount of recoverable gas reserves were found, according to the Upstream Oil and Gas Regulatory Task Force (SKKMigas).
Thus, the development will likely be increased to reach a total capacity of 7.5 million tons per year and a revision of the plan of development has been sent to SKK Migas.
Following a visit by Inpex representatives late last year, Vice President Jusuf Kalla said the government would grant an extension on the Masela block if the developer performed well and accelerated its progress in developing the block.
The Inpex spokesperson could not immediately be reached for comment on Wednesday.
Meanwhile, Maluku Governor Said Assagaff said his administration would demand the central government's assurances regarding the 10 percent stake, adding that such a plan had been mentioned previously by the Susilo Bambang Yudhoyono administration.
'We are now in the President Jokowi [Joko Widodo] era. We hope that the 10 percent participating interest for the local administration can be realized. Uncertainty has raised questions over the central government's seriousness in this matter,' he said as quoted by Antara.
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