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Jakarta Post

Luhut keeps eye on Masela block, Freeport

  • Fedina S. Sundaryani and Prima Wirayani

    The Jakarta Post

Jakarta   /   Thu, August 18, 2016   /  07:16 am
Luhut keeps eye on Masela block, Freeport Coordinating Minister for Maritime Affairs Luhut Pandjaitan speaks to journalists in Jakarta recently. (JP/Wienda Parwitasari)

Interim energy and mineral resources minister Luhut Pandjaitan has vowed to pick up the pieces following the abrupt dismissal of offshore oil and gas expert Arcandra Tahar as the minister, especially on the government’s priority projects.

Arcandra was chosen in the hope of revitalizing the country’s much maligned oil and gas industry, but those hopes were dashed after 20 days when allegations emerged that he possessed dual US-Indonesian citizenship, which is illegal in the country.

Despite the speed bump, Luhut — who was recently rotated to become coordinating maritime affairs minister from coordinating legal, security and political affairs minister — praised Arcandra’s work and said he would continue to monitor all priority projects during his stint as interim minister.

Priority projects include the 35,000 megawatt (MW) electricity procurement plan and the Mahakam and Masela gas projects. The government is also negotiating with copper and gold mining company PT Freeport Indonesia over a divestment offer worth US$1.7 billion.

“What Pak Candra [Arcandra] has done is very good as he was able to cut many costs. He also asked for more transparency in structural costs. I understand these things because I’m also a businessman,” he told reporters at the Energy and Mineral Resources Ministry.

Prior to his dismissal, Arcandra announced that it was possible for the cost of the $16 billion Masela gas block project to be reduced even further to $15 billion. The onshore liquefied natural gas (LNG) project is set to be the country’s largest deepwater development, with a projected processing capacity of 7.5 million tons per annum.

Furthermore, Arcandra also issued a recommendation for PT Freeport Indonesia to obtain an extension on its mineral concentrate export permit, which currently allows the subsidiary of US-based Freeport McMoRan to continue exporting until Jan. 11 next year. The permit gives Freeport an export quota of 1.4 million tons during the six-month period.

The company would not be able to export after the deadline as a nationwide ban on mineral concentrate exports will be implemented the next day.

However, Luhut said the ministry would discuss the possibility of extending Freeport’s permit. “The secretary-general spoke about [Freeport]. I will wait for a report from the director general,” he added.

Freeport Indonesia is also obliged to meet the government’s request to divest up to 30 percent of its shares to Indonesian shareholders in the renegotiation of its operating contract, which will end in 2021.

It must offer the Indonesian government a 10.46 percent stake in the Grasberg mining site in Papua, the largest gold mine and third-largest copper mine in the world, this year, while the remaining shares must be offered up by 2019.

The $1.7 billion price offered, however, was calculated with the assumption that the company would immediately obtain a contract extension.

Meanwhile, Investment Coordinating Board (BKPM) head Thomas Lembong assured that the change of minister would not disrupt any future investments in the energy sector.

Golkar Party legislator Satya W. Yudha also expressed confidence that the change would not affect the government’s energy targets as all priority projects were stipulated in the National Energy Policy (KEN).

“There are several priorities that must be continued, including the Freeport divestment plan and the 35,000 MW program. Other priorities include the development of new and renewable energy and how to increase our oil and gas production,” he said.

“This is what the President and the House have discussed all this time.”

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