Indonesia threatens to cancel Masela contracts

JAKARTA. Energy and Mineral Resources Minister Ignasius Jonan has threatened to cancel production-sharing contracts (PSCs) on the gas-rich Masela block if the contractors do not get the ball rolling on the field's development.

The government has asked Japan-based Inpex and Dutch Shell, which hold 65 and 35 percent stakes in the block, respectively, to conduct a preliminary front-end engineering design (pre-FEED) in order to determine the production capacity of the onshore liquefied natural gas (LNG) plant and the buyers of piped gas.

"If Inpex takes too long to conduct the pre-FEED then I will cancel the contract. My patience is wearing thin," he said on the sidelines of a national gas forum in Central Jakarta on Wednesday.

"I have been [the energy and mineral resources minister] for six months and they still haven't started."

The government has given the companies two options on the LNG plant capacity: 7.5 mtpa with 474 million standard cubic feet of gas per day (mmscfd) or 9.5 mtpa and 160 mmscfd. The piped gas will be sold to local petrochemical companies.

The gas-rich Masela block is estimated to be able to produce 1,200 mmscfd and 24,000 barrels of condensate per day for 24 years.

While the government is optimistic that the block can start operating by 2023, the previous plan on development (POD) estimated that the gas field could start production by 2024, and start piping gas in 2026, just two years before Inpex's and Shell’s contracts expire. (bbn)