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Inpex signs deal for development of Masela Block
The Indonesian government and Japanese oil and gas giant Inpex have signed a basic agreement on the development of the Abadi gas field in the Masela Block in eastern Indonesia, paving the way for the commencement of project estimated to be worth between US$18 billion and $20 billion
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span>The Indonesian government and Japanese oil and gas giant Inpex have signed a basic agreement on the development of the Abadi gas field in the Masela Block in eastern Indonesia, paving the way for the commencement of project estimated to be worth between US$18 billion and $20 billion.
The head of agreement (HoA) was signed by Upstream Oil and Gas Regulatory Task Force chief (SKKMigas) Dwi Soetjipto and Inpex Indonesia president Shunichiro Sugaya on the sidelines of the G20 energy and environment ministers summit in Karuizawa, northwest of Tokyo, on Sunday.
Inpex president Takayuki Ueda said the company planned to submit a development plan for the project to the government in several weeks and aim to make a final investment decision within three years.
“We have signed a head of agreement with the Indonesian government [...] on behalf of the project partners after gaining endorsement from Shell,” he was quoted as saying by Reuters.
For Inpex, this will be its second major liquefied natural gas (LNG) project as an operator after the $40 billion Ichthys LNG project in Australia. The Ichthys project, Japan’s biggest overseas investment and the country’s first major project as lead operator, started shipping LNG last October after several delays and cost overruns.
The HoA outlines basic principles that will be stipulated in the revised plan of development (PoD) and terms regarding the production sharing contract period, financial conditions and cost estimations, which should be agreed on in advance of the commencement of the project, Inpex Indonesia’s spokesperson M. Nunung Kurniawan said.
“After the HoA, Inpex is going to prepare the documents required for the submission of the revised PoD to the Indonesian authorities at an early stage,” Iwan told The Jakarta Post via text message.
In 1998, Inpex secured a contract to operate the Masela Block through the government’s open bidding process and subsequently explored the block, where it discovered the Abadi Field during exploratory drilling in 2000.
At present, the company owns a 65 percent stake in the project, while the remaining stake belongs to Royal Dutch Shell, the world’s largest LNG trader.
Following the signing of the HoA, Inpex will apply for a 20-year extension and amendments to the existing production sharing contract in conjunction with the submission of the revised PoD, Iwan said. “We expect the government’s approval process to proceed smoothly after the submission of the revised PoD,” he said, adding that once the PoD had been approved, Inpex would continue by preparing the block’s front-end engineering design.
Previously, the first deadline for the operation of the gas field was 2018. Based on recent SKKMigas data, the Abadi Field’s LNG project is estimated to go onstream in the second quarter of 2027 with an estimated annual LNG output of 9.5 million tons and 150 million standard cubic feet per day.
Separately, Dwi Soetjipto said the HoA signing was an important milestone in the development of upstream oil and gas operations in Indonesia.
The development of gas blocks, in particular, had become more important as the commodity has become the sole stronghold in Indonesia’s oil and gas trade balance.
“With the development of the Masela Block, we expect to see a huge inflow of foreign investment [...] and a multiplier effect on [the block’s] supporting and derivative industries domestically, thus supporting the national economy,” Dwi said during the signing as quoted in a statement.
