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Japan’s Inpex to start Masela construction
Japanese energy firm Inpex Corp
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span>Japanese energy firm Inpex Corp., the operator of the gas-rich Masela Block, is about to begin construction work on liquefied natural gas (LNG) facilities in the Arafura Sea after the project was in limbo for around two decades.
The green light came as the government on Tuesday approved the revised plan of development (PoD) for the US$20 billion on-shore Abadi LNG project at the Masela Block.
The approval was officially marked by Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) chairman Dwi Sutjipto handing over the final PoD to Takayuki Ueda, the CEO of Inpex Corp., at the State Palace.
President Joko “Jokowi” Widodo and Energy and Mineral Resources Minister Ignasius Jonan, among other people, witnessed the handover.
Dwi said the President expressed his three wishes for Inpex with regard to the Masela project.
“[The President] wants Inpex to commit to what has been agreed in the PoD, second, to improve the local content of the project and finally to improve the local human resources,” he said.
Inpex Corp. managing executive officer Kenji Kawano explained that, after the approval of the PoD and the contract extension, the next step for the company was to finish the front-end engineering design (FEED) and the final investment decision (FID).
“After the FID, we will start the construction and then start LNG production in the later half of the 2020s,” he said.
The company will need up to four years from now to conclude the FID phase, according to Ueda. Meanwhile, the engineering, procurement, construction and installation (EPCI) process will take up to five years to complete, totaling nine years before Inpex can produce its first LNG.
“The Masela Block is a long-term project that could last for 30-40 years. Hence, it’s crucial to have a stable investment climate and policy certainty,” Ueda said.
“Don’t change your goal posts after we’ve started [the development plan on the Masela Block], as we will be the ones taking the risks. Please keep the regulatory framework as it is,” he added.
In a nutshell, the development plan is to build an onshore LNG plant (OLNG) in Tanimbar Islands regency of Maluku province, a floating production, storage and offloading facility (FPSO), a gas pipeline from the FPSO to the OLNG and subsea facilities.
Once all of the facilities have been fully constructed, the Masela Block will have a total natural gas output of 10.5 million tons per annum (mtpa).
With the approval, the government also granted Inpex a seven-year exceptional extension for its production-sharing contract (PSC) for the block, followed by the regular 20-year extension, prolonging the company’s control of the block until 2055. The current PSC will expire in 2028.
“The new PSC is already approved [by the government], and the same scheme of cost recovery will be applied [in the new contract for 2028 to 2055],” Ueda of Inpex said.
Previously, Wood Mackenzie research director Andrew Harwood said in a statement that progress on the Abadi field was critical for Indonesia, as domestic LNG demand was expected to rise to 13 million mtpa by 2030 because of growing gas demand amid declines in production.
However, Harwood noted several challenges in the development process, including the possibility of a crowded engineering, procurement and construction market due to the record number of LNG projects vying for sanction over the same period.
