Inpex Requests Amendment to Terms of Masela Block Contract

Inpex Corporation has requested amendments to the terms and conditions of the PSC for the Masela Block. The changes are needed to carry out President Joko Widodo’s decision to use an onshore plant scheme in the gas-rich block in the Arafura Sea, Maluku.

Inpex spokesperson Usman Slamet said that his company had sent an official letter to the government in response to the President’s decision on April 1. As reported earlier, Widodo opted for an onshore LNG scheme to develop gas in the Masela Block, ending a seven-month controversy over which scheme would be used to develop the block. (Read: Widodo Decided to Use Onshore Scheme for Masela Block Development)

As the operator of the Masela Block, Inpex initially proposed using a floating LNG (FNLG) refinery which was considered more economically viable. The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) and the Ministry of Energy and Mineral Resources (EMR) also supported this option.

In the end, however, the President opted for the onshore scheme for two reasons. First, the government wants the Masela Block development project to help drive the national and local economies. Second, the project is expected to boost local development in the Maluku region and surrounding areas.      

Usman said that in the letter Inpex told the government that the company did not object to the President’s decision. “The point is we respect the government’s decision and are ready to review the onshore concept,” he said to Katadata, Tuesday (7/6). (Read: Send Letter to Widodo, Inpex Committed to Immediately Work On Masela Block)

Usman added that to develop the block, which has gas reserves of 10.73 trillion cubic feet(tcf), the company needed to review several points in the contract. The goal is to keep the Abadi gas field project in the Masela Block economically viable in terms of the technical, economic and social aspects. “So, new terms and conditions are needed,” he said without elaborating on which points in the contract would be amended.

The Energy Ministry has received several proposed incentives from Inpex for the development of the Masela Block. The government will review the proposals prior to giving its approval.

Minister of EMR Sudirman Said said that SKK Migas was reviewing the proposals. The agency, which is in charge of supervising oil and gas contractors, is still calculating the economic value of the Masela project under the onshore LNG scheme. “Let SKK Migas finish (its review),” he said in Jakarta, Tuesday (/6). (Read: Masela Project Delays, Rizal Ramli Asks Inpex Not to Dictate the Country)

According to Sudirman, Inpex’s request for incentives is reasonable, especially since the original proposal submitted by the Japanese company assumed that the FLNG scheme would be used rather than the onshore LNG scheme opted for by the government. Meanwhile, the government has indicated it will renew Inpex’s contract in the Masela Block, which will expire in 2028.