Inpex?s contract over Masela block may be extended for up to 30 years

By Bernard Loebs

Inpex Corp?s contract over the Masela block in Maluku Province is likely to be extended for a longer period than what is set under the existing regulation as part of incentives prepared by the government to help accelerate the development of the gas-rich Abadi field in the block.

Interim Minister of Energy and Mineral Resources Luhut Panjaitan said on Wednesday that Inpex has requested for an extra 10 years when the government extends its current contract, which is set to expire in 2028, as compensation for the government?s decision to force the company, the operator of the block, to switch to onshore LNG production scheme in developing the Abadi field, instead of the initially proposed offshore plant.

He added that Inpex had spent about 10 years to study the offshore development scheme for the Abadi field project.

?We provide incentives. Inpex asked (me): Can we get (extra) 10 years because of the change (in the scheme from offshore to onshore). I said: Why not?? Luhut said.

If the request is finally approved, Inpex?s current contract over the block will be extended for another 30 years. According to the existing Government Regulation No 35/2004, contract extension can only be given for up to 20 years.

Following months of noisy debates, President Joko Widodo decided in March of this year to change the production scheme for the Abadi gas field to onshore production facility, instead of the offshore scheme as proposed by Inpex in a plan of development (PoD), which had been approved by the Ministry of Energy and Mineral Resources. Under the initial PoD, Inpex, which owns 65 percent interest in Masela block (the remainder is held by Shell), is projected to start production at the block in 2024.

Luhut has asked Inpex to complete the revision of the PoD within eight months to help accelerate the development of the Abadi field.

Elsewhere, Luhut said that that the government is considering to change the revenue split as part of incentives for Inpex. He said that the government does not need to insist on 85 percent revenue split from the block.

He said that the Ministry of Finance has estimated that the government?s split of the revenue could be lowered to around 60-70 percent, meaning that the investors could take up to 40 percent.

Editing by Reiner Simanjuntak