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Indonesia, Inpex may ink deal on Masela block development during PM Abe’s visit

JAKARTA ( – The Indonesian government and Inpex Corporation may ink deal on Masela Block development on Jan. 15, 2015, in conjunction with the visit of Japanese Prime Minister Shinzo Abe.

“We are now finalizing (the details). Masela could be agreed (during the visit of PM Shinzo Abe},” said Coordinating Minister for Maritime Affairs Luhut Binsa Panjaitan on Monday (Jan. 9).

Luhut hopes that seven year offer is the final deal and aggred by Inpex.

The investment to develop LNG in onshore could be in a range of USD15-16 billion, higher than earlier projection of USD14 billion, should the LNG plant to be built offshore through deploying a FSRU.

Luhut said Inpex has expressed its agreement unofficially to the Indonesian government.

The Indonesian government has granted 7 years of contract moratorium, not 10 years as required by Inpex Corporation, to compensate lost years following the government’s decision to shift development of Masela Block production facilities to onshore, instead of offshore.

The government’s offer has been agreed by Inpex, the operator of the Masela Block, and its partner Shell, said Indonesia’s Coordinating Minister for the Maritime Affairs Luhut B. Panjaitan Wednesday (Jan. 4).

Minister Luhut said recently that the capacity of the processing facility will remain at 7.5 MTPA in order to be absorbed by domestic industry players. Earlier, Inpex has proposed to the government to raise the capacity to 9.5 MTPA.

Inpex has also set cost recovery during the exploration period at USD1.2 billion. However, the cost recovery is yet to be approved by the Indonesia’s Energy and Mineral Resources Ministry pending on audits.

On March 23, 2016, President Joko Widodo said he has decided production facilities of Masela LNG project will be built onshore, instead of offshore as proposed by Inpex Corp, the operator of the block. As a result, Inpex must review and resubmit the PoD for Masela Block. Initially, the operator decided to develop floating storage regasification unit (FSRU).

Given this situation, Inpex has sent a letter to the Indonesian government, requesting the government to give 10 years of contract moratorium for 10 years between 2006 until 2016. The request is to compensate considered ten years of loss following the government’s decision to change the project scheme.

As a consequence of the ten years moratorium, Inpex seek extension of 10 years to compensate the forgone ten years to 2038 after the existing contract to develop Masela Block expires in 2028.

As a result of the government’s decision, the existing contract will expire in 2035. (*)

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