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Jonan resorts to bullying major foreign oil companies
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Energy and Mineral Resources Minister Ignasius Jonan, by State-owned Eenterprises Minister Rini Soemarno (right) and Energy and Mineral Resources Deputy Minister Archandra Tahar attend a Cabinet meeting at Presidential Office on Jan. 24. (Antara/Rosa Panggabean)
F
or Japan’s Inpex Corp. and Royal Dutch Shell, Indonesia’s abrupt policy change to make them rewrite their multi-billion-dollar business plan last year may not be their last hurdle, even after more than six years of negotiations aimed at getting the project running.
The companies, at risk of losing the US$1.6 billion they already sank into gas exploration in the Masela block in Maluku, were forced by President Joko “Jokowi” Widodo in March last year to alter their plan to extract gas from the block using offshore facilities. They must now use onshore facilities instead.
While the companies have finally agreed to move forward with the $19 billion onshore project, the biggest ever in Indonesia, a recent deadlock in the negotiations with the authorities over preliminary facility design have made them the apparent victims of bullying-like tactics.
Energy and Mineral Resources Minister Ignasius Jonan has threatened to cancel a production-sharing contract (PSC) involving the gas-rich block if the contractors do not get the ball rolling on the field’s development.
The government has asked Inpex and Shell, which hold 65 and 35 percent stakes in the block, respectively, to immediately agree to the Energy and Mineral Resources Ministry’s terms for the design during the so-called preliminary front-end engineering design (pre-FEED) phase.
This phase will determine the production capacity of the onshore liquefied natural gas (LNG) plant, the length of pipes, the allocation of gas for local use and the islands where the facilities will be located, among other things.
“If Inpex takes too long to conduct the pre-FEED then I will cancel the contract. My patience is wearing thin,” Jonan said on the sidelines of a national gas forum in Jakarta on Wednesday.
