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Indonesia govt and Inpex reach an agreement on Masela Block PoD (Photo credit: Setkab/Cabinet Secretary)

Indonesia govt, Inpex agree on $20b onshore-based Abadi Field project

The Indonesian government and Inpex Corporation of Japan have finally reached an agreement on the final plan of development (PoD) of the giant gas field Abadi Field project, located within the Masela Block in the Arafura Sea, Maluku.

The agreement was agreed by the Energy and Mineral Resources Minister Ignasius Jonan and CEO of Inpex Corporation Takayuki Ueda in Tokyo on Monday (May 27), in which both parties agreed on some strategic points to develop the gas field.

Minister Jonan was accompanied by the Indonesian Ambassador to Japan Arifin Tasrif, the Head of SKK Migas Dwi Soetjipto, Deputy Head of SKK Migas Sukandar and Deputy Planning of SKK Migas Jafee Suardin.

Minister Jonan was on his way back home after visiting the U.S. The agreement was a follow-up of meeting between Minister Jonan and CEO of Inpex on May 16, when Minister Jonan was on his way to the US.

The Ministry of Energy and Mineral Resources (MEMR) said in a statement that the cost to develop the Abadi Field is estimated to reach US$20 billion.

As part of the deal, both parties reached a win-win solution in term of profit sharing, in which Indonesia will get profit sharing of 50% and the other half is for Inpex.

Minister Jonan praised the deal dubbed it as a ‘historic moment’ and felt relieved as both parties have discussed the development of Masela Block since 18 years.

“The investment value would be in the range of US$18-20 billion with a fair portion for Indonesia and the contractor (Inpex). I am really happy,” Minister Jonan said.

The MEMR said the Indonesian government and Inpex is expected to sign the PoD of Masela Block at the upcoming G20 meeting in Japan.

Masela Block is estimated to have gas reserves of 10.73 trillion cubic feet (tcf).

The above agreement was reached after a lenghty and intenses discussions, which at some points marked by heated public debate. The debate triggered by the different of opinions whether Inpex should go ahead with developing offshore processing facilities (FLNG) or developing onshore LNG plant like in Tangguh and Bontang.

In 2015, former Coordinating Minister for the Maritime Affairs and Resources Rizal Ramli pushed the government to force Inpex to develop onshore processing facilities, instead of offshore facilities as it will trigger economic development in the islands, where LNG plants are developed.

Rizal Ramli argued that the development of onshore LNG pant will stimulate the development of Aru Island, just like Balikpapan town in East Kalimantan, which benefited from the development of Mahakam block and other oil and gas blocks in East Kalimantan. He also said the development of onshore facilities will cost less, at around US$14 billion, instead of US$19 billion to develop offshore facilities (FLNG).

President Joko Widodo finally announced publicly that the Indonesian government opted for developing onshore facilities.

Following the above agreement, there are still long way to go before the project comes onstream, which is expected to happen in 2027, one year before Inpex existing contract expires. Certainly, Inpex wants its production sharing contract (PSC) is extended before it can begin constructing production facilities. (*)

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