URGENT: Government extends Masela FLNG contract
Thursday, February 2 2012 - 02:35 AM WIB
By Bernard Loebs
The government and the upstream authority BPMIGAS have approved Inpex Corporation?s demand to extend its contract to develop the Masela Floating LNG (FLNG) project for another 20 years to assure commercial viability of the project ahead of schedule, a BPMIGAS official said.
?BPMIGAS and the government have agreed to extend the FLNG Masela project,? Spokesperson of BPMIGAS I Gde Pradnyana told Petromindo.com.
Gde made the comment in response to Petromindo.com's question that Inpex has sought contract extension for Masela FLNG project before it commences production.
Inpex Corporation contract to develop the Masela LNG project will expire in 2028. Under the existing regulation, a production sharing contractor (PSC) may demand another 20 years of contract 10 years before the contract expires.
Asuming that the FLNG project commences production at the latest in 2018, it would not be commercially viable if Inpex seeks extension after 2018 because it has only 10 years remaining to develop the project.
Although Inpex has informed the government that the Abadi field in Masela will begin production in 2018, the government still hopes that Inpex would begin production in 2016.
Gde said the approval was given to ensure that the Masela FLNG project is commercially viable, similar to the BP LNG Tangguh case. Originally, BP?s contract to operate the Tangguh LNG project in west Papua expired in 2017. Under the applicable regulation, BP had a right to seek contract extension after 2007. However, BP was allowed by the government to seek extension earlier than schedule. In 2004, the government approved BP?s demand to extend its contract to operate Tangguh LNG until 2037, before the project began operating.
Currently, Inpex is in the process of tendering the Front-End Engineering Design and Engineering, Procurement and Construction for the Masela FLNG project. A number of participants including Chiyoda Corp., Technip, Saipem, IKPT-Petrofac consortium, Tripatra Engineering, Malaysian firm EJ Joint Venture, Indoturbine and JGC have submitted their bids.
Inpex and BPMIGAS are expected to announce the winner of the tender by end of first half 2012.
Inpex, which operates the Masela block, is planning to build a floating LNG plant with initial capacity of 2.5 MTPA.
Editing by Roffie Kurniawan