There is Still Hope in Upstream Oil and Gas

Upstream oil and gas investment in Indonesia is believed to be still prospective, despite a number of challenges due to fluctuations in world oil prices and the Covid-19 pandemic. Moreover, the government has also given the flexibility to investors to choose the form and production sharing contract in oil and gas activities.

The policy is believed to provide legal certainty and increase oil and gas investment in Indonesia. But of course, it must be punctuated by the right strategy and oil and gas investors to survive and get out of the crisis.

Arcandra Tahar

Former Minister of Energy and Mineral Resources (ESDM) for the 2014-2019 period Arcandra Tahar said investment in upstream oil and gas was not merely a matter of the political situation in a country. According to him, the majority of investors will enter the oil and gas project which is considered to provide good profits for the company.

"Investment does not recognize citizenship. That is, where there is a profitable investment, investors will enter, "he said.

 

the Masela block

Referring to the news of Shell's departure from the Masela and Chevron Block projects on the Indonesia Deepwater Development (IDD) project, Arcandra said many factors could trigger the decision. Comprehensively the decision could be influenced by the shifting focus of the company relating to economic value. But the withdrawal of two global oil and gas companies from the project in Indonesia cannot be used as a reference that investment conditions in Indonesia are not good.

"Can you see that their assets (Investors) are sold abroad? I think so. What does it mean, if we only look at it from one side, the investment climate might not be okay. "

He considered the mix of business portfolios in oil and gas companies could be one strategy to get out of the crisis. According to him, the weakening of world oil prices and falling demand that occurred some time ago along with the Covid-19 pandemic was one of the extraordinary events.

However, basically the oil and gas industry is a business whose principles always fluctuate, so there should be mitigation to go through difficult times. Was this not prepared in advance by the oil and gas company? I think it's been prepared, "Arcandra said.

Shell

For this reason, the business portfolio mixes between upstream and downstream needs to be balanced considering that there are still oil and gas companies that can get profit, in a state where oil prices are skyrocketing or weakening. According to him, this was also done by large-scale global oil and gas companies such as Shell and Chevron. In addition, the oil and gas companies have begun to apply the trend to anticipate difficult times.

"So a strong company, a balance between upstream and downstream. Even if a medium company has a good strategy, besides having a business in the upstream, they also anticipate it in the downstream, "he explained.

Dwi Soetjipto

SKK Migas Head Dwi Soetjipto projects that oil and gas investment this year will only reach US $ 11.6 billion, down 16% from the target of US $ 13.8 billion. According to him, global upstream oil and gas investment trends this year are also projected to fall by around 30% to the US $ 228 billion from the initial 2020 target of US $ 325 billion.

"So in Indonesia the decline is far better than the global upstream oil and gas trends," he said.

PORTFOLIO CHANGE

Both Shell and Chevron are known to change their investment portfolios in the upstream oil and gas sector in the world, including for projects in Indonesia. Chevron Asia Pacific External Affairs Advisor Cameron Van Ast said it was giving a signal to release its participation in the IDD project. 

He revealed that the plan had been reviewed since the beginning of this year and he dismissed that the decision was related to the acquisition of Chevron in Noble Energy shares on July 20, 2020.

PT. Chevron Pacific Indonesia's

Chevron Pacific Indonesia's Corporate Communication Manager Sonitha Poernomo added that the Phase 2 IDD project could not compete for capital in Chevron's global portfolio. Meanwhile, Shell was quoted from the official website of Shell Global, dividing the oil and gas company's business into the upstream business, integrated gas, renewable energy, and downstream business.

Sonitha Poernomo

In line with Arcandra, Secretary-General of the National Energy Board Djoko Siswanto is optimistic that Indonesia's upstream oil and gas sector is still in good condition and attractive to investors. 

Hilmi Panigoro

    On the other hand, President Director of Medco Energi Hilmi Panigoro revealed that Indonesia's biggest challenge to bringing in investment in the upstream oil and gas sector is legal certainty which is more attractive to investors.

According to Hilmi Panigoro, there are many investors who prefer other countries than Indonesia even though the tax conditions and political conditions are not better. Hilmi said this could happen because the investors considered that they did not have more risks given the clear legal certainty.

"For example, now the government is changing its paradigm, energy is not a source of revenue, then gas prices are lowered, but the contractor's rights must be maintained so that investors believe. So whatever the form of the regime, what is important right now is how this new law can be a guarantee, so the signed agreement must be maintained, "he explained.

Regarding oil and gas production sharing contracts, ESDM Minister Arifin Tasrif issued Minister of Energy and Mineral Resources Regulation No. 12 of 2020 concerning the Third Amendment to the Minister of Energy and Mineral Resources Regulation No. 8 of 2017 concerning Gross Split Production Sharing Contracts.

In Article 2 paragraph (2) of the Ministerial Regulation, it is explained the form and cooperation contract can use Gross Split, Cost Recovery, or other cooperation contracts. Arifin also abolished the provisions regarding the management of the Work Area that ended the contract period and was not extended, the government imposed a Gross Split for the next period. In addition, in the case of Work Areas that will expire in the contract period, the government can stipulate all cooperation contracts or Gross Split.

Bisnis Indonesia, Page-10, Monday, August 3, 2020

Masela LNG Project Hampered by Land Problems

The Masela Block liquefied natural gas (LNG) refinery project in the Tanimbar Islands, Maluku, faces a winding road. After Royal Dutch Shell will leave the Masela Block, the problem now arises from the unfinished refinery holding.

Referring to the notes of the Special Task Force for Upstream Oil and Gas Activities (SKK Migas) until June 2020, the available land is still partial. Even though this project is targeted to operate or onstream by 2027.

    The problem of the Contribution is potentially more complicated. Because reportedly, the Sinar Mas Group is said to have bought a portion of land in the village of Lermatang, South Tanimbar, Tanimbar Islands, Maluku Province. Its location is in the Weminak River area, the border between Lermatang Village and Bomaki Village.

Even though Maluku Governor Murad Ismail in early June this year submitted the Governor's Decree regarding the determination of the allocation of the Masela liquefied natural gas refinery port on Nustual Island, Lermatang Village, South Tanimbar, to the Head of SKK Migas Dwi Soetjipto. In the Maluku Provincial Government Decree, the allocation is 27 hectares (ha). The land in that location is said to have been bought by the Sinar Mas Group.

"I have got a report. But because the large-scale land acquisition is handled by Jakarta, we submit this problem to Jakarta (SKK Migas). " Rinto Pudyantoro, Chief Representative of SKK Migas Papua Maluku.

But Rinto was reluctant to mention on behalf of what company and what price of land purchased by the Sinar Mas Group. Rinto only stated that, in principle, the Masela Blok LNG refinery project was a state project, so the land was bought and acquired on behalf of the Minister of Finance and became the property of the state. Likewise, private property to be purchased.

Gandi Sulistiyanto

The Managing Director of the Sinar Mas Group, Gandi Sulistiyanto, denied that he had bought or even owned land in the area.

"I have checked with the forestry and mining unit, there is no land in the area. Where's the news from? Which regency and province? "He said.

Acting Head of the SKK Migas Program and Communication Division, Susana Kurniasih, said that the Sinar Mas Group did not coordinate with SKK Migas.

"If it is true that Sinar Mas will be active in Lermatang Village, we hope that the activities will not interfere with the Masela project plan," he said.

    Moreover, the Tanimbar District Head, Maluku Governor and the Minister of Environment and Forestry (LHK) have agreed on the needs of the LNG refinery allocation. Head of SKK Migas. Dwi Soetjipto emphasized that the Masela onshore LNG Plant project should not be disrupted. The Central Government and regional governments have committed to that, "he said.

Inpex Corporation

    Regarding the prospective LNG Plant location, the management of Inpex Corporation stated that it always refers to the Decree of the Maluku Governor. The exact location and area of ​​the Abadi LNG refinery will be finalized after the results of the survey and design study have been studied, "said MN Kurniawan. Act Corporate Communication Manager Inpex Masela.

Kontan, Page-1, Monday, July 27, 2020

Upstream Oil and Gas Demands Immediate Incentives

The lively plan to leave global oil and gas companies from Indonesia must receive serious attention. Because, at present the competition in the upstream oil and gas investment portfolio at the regional and global level is getting tougher. Especially in the global pandemic situation that afflicts almost all countries in the world. Conditions that make oil and gas companies really count when investing.

"At that time, global companies will only aim at investment portfolios in countries that are considered truly profitable and occupy their priority scale," said Oil and Gas Observers from Trisakti University, Pri Agung Rakhmanto.

Now, to attract investment in upstream oil and gas, various government incentives need to be prepared. The incentive makes the oil and gas investment climate in Indonesia more attractive. 

Royal Dutch Shell (Shell)

       Just so you know, within this month, there are two global investors who want to leave the area hit by oil and gas in Indonesia. First Royal Dutch Shell (Shell) will sell its 35% stake in the Masela Block.

the Masela Block

The two PT Chevron Pacilik Indonesia (Chevron) are reluctant to continue the Phase II project in the Indonesia Deepwater Development (IDD) Block. Indonesian Petroleum Asociation (IPA) Executive Director, Marjolijn Wajong said oil and gas companies both domestically and globally are considering market conditions and oil and gas commodity prices, especially after the Covid-19 pandemic subsided.

the Indonesia Deepwater Development (IDD) Block

"Most still wait and see to see how things are after the pandemic has subsided," said Marjolijn Wajong.

Chairman of the Association of Oil and Gas Companies (Aspermigas), John S. Karamoy added, the government needs to be introspective with the current condition of oil and gas investment. The withdrawal of some global companies is expected to not interfere with the development of the upstream oil and gas business in Indonesia.

The Acting Head of the SKK Migas Program and Communication Division, Susana Kurniasih, admitted that her office continued to monitor developments in upstream oil and gas investment. Meanwhile, upstream oil and gas incentives are still being discussed together with the Ministry of Finance (MoF). 

    So far, there has been an incentive from SKK Migas in the form of postponement of the Depository Siter Restoration (ASR) deposit. Well, SKK Migas also proposes other stimuli to attract investment.

"We and the Ministry of Finance (Ministry of Finance) are discussing together, but the decision is not at SKK Migas," he said.

He revealed that the stimulus to delay the deposit of ASR was to ensure that the KKKS could continue their operations during the Covid-19 pandemic.

Kontan, Page-10, Saturday, July 25, 2020

Looking for a Substitute Shell in the Masela Block

The desire of Royal Dutch Shell to flee from the Masela Block was so serious. Research institute Rystad Energy has even released research, Shell is eyeing funds of up to the US $ 2.2 billion from the sale of 35% of participating interest in participating in the Abadi Gas Field.

the Abadi Gas Field

Rystad Energy Readul Islam analyst said, even in good economic conditions, it is very difficult to predict the parties who are interested in buying Shell's participating shares in the Masela Block. 

     From its origin, global oil and gas players are likely to have shopped for current liquefied natural gas (LNG) exposures. He even considered Inpex Corporation could involve the Japanese government and the Japanese consortium to take over Shell's shares.

"But with Shell's value of US $ 2.2 billion, it is difficult to see Inpex, which is financially limited," he said, as quoted by energy voice dot com.

Executive Director of Upstream Consultant, Molyneux Advisors, Simon Molyneux, assessed that the Masela Block project has very high development costs and there are technical challenges that will be faced by potential buyers of Shell participation rights other than companies from Japan, according to him, it is possible that the Indonesian government will open up to investors come from China.

For investors from Japan, chances are, the Mitsubishi Group is also likely to be interested in the Masela Block, given Mitsubishi's lunge in general in Indonesia. Asia Pacific Research Director Wood Mackenzie Andrew Harwood said the plan to release Shell's participation rights in the Masela Block was more complex than the issue that had circulated about Shell's flee in 2019.

It is unlikely for giant oil and gas players to replace Shell in the Masela Block. According to him, there are several national oil and gas companies (NOCs) in the Asian region that have the opportunity to enter the Masela Block. The move is to market LNG to his country.

Rhea Sianipar

Shell Indonesia's Vice President for External Relations Rhea Sianipar was reluctant to answer the amount of the release of participation rights.

Rhea just said, "We cannot provide further comments regarding Shell's portfolio activities. There has been no comment from us," Rhea said.

Acting Corporate Communication Manager of Inpex Masela, Moch N. Kurniawan also declined to comment. But he ensured, his party remained focused on developing the Masela Block Abadi LNG project and was confident that the project would continue.

Nicke Widyawati

What about PT Pertamina (Persero)? When asked whether he was interested in taking Shell's shares in the Masela Block, PT Pertamina's Managing Director Nicke Widyawati only replied that his party was currently looking for opportunities to acquire oil blocks.

 "I am looking for oil, Masela is only gas," said Nicke Widyawati.

Kontan, Page-12, Monday, July 20, 2020

Shell Ensures Downstream Business Continues

Shell Indonesia guarantees that its oil and gas downstream business in Indonesia will remain expansive amid news of the release of the 35% participating interest (PI) of the Shell Group in the Masela Block.

Rhea Sianipar

Shell Indonesia's External Relations Vice President Rhea Sianipar said investment activities in the downstream sector were still being carried out. Even Shell's downstream oil and gas business is very expanding. One example is the development of a Shell lubricant factory in Marunda, North Jakarta.

In this project, Shell is working on increasing the capacity of the lubricant plant. On the other hand, Shell ensures that the gas station business line also continues to be the focus of their business in Indonesia.

"Our retail business has grown to 116 Public Fuel Filling Stations (SPBU), not only reaching big cities, but also small cities in Indonesia," Rhea said.

But She was reluctant to comment on the news of the release of the 35% interest of the Shell Group Interest Participation in the Masela Block.

the Masela Block

"We cannot comment further on Shell's portfolio activities," Rhea said.

While the Inpex Masela Corporate Communication Manager, Moch N. Kumiawan said, currently it is focused on the planned development of the Abadi LNG project, Masela.

"We are confident that this project will continue and we are actively working to implement a development plan (POD) approved by the Indonesian government," he said.

Kontan, Page-10, Monday, July 13, 2020

Inpex Committed to the Masala LNG Project

Inpex and Shell are still discussing the transfer of 30% of Shel's participating interest

Royal Dutch Shell (Shell) 

Inpex Corporation's management is committed and believes that the Masela Block project continues, despite news of the departure of Royal Dutch Shell (Shell) as the owner of 35% participating interest in the block.

Act Corporate Communication Manager of Inpex Masela Moch N Kurniawan said, at this time his side focused on preparing the development of the Abadi LNG project, Masela.

the Abadi LNG Gas Field

"As operators of the Abadi LNG Project and supported by the Government of Indonesia, we believe this project will continue. We are actively working on implementing the plan of development (POD) approved by the Government of Indonesia," said Kurniawan.

However, he did not want to detail the continuation of discussions between Shell and Inpex. Currently, Inpex as the largest shareholder in the block is looking for a replacement for Shell. 

    In the Masela Block, Shell has a participating interest (PI) of 35%. while Inpex Corporation controls 65% PI. Later, the local government will receive a 10% allotment of participation rights, which will be taken from ownership of Shell and Inpex.

The reason for Shell's withdrawal from the Masela Block development project was due to the condition of their cash flow which was affected by the corona pandemic (Covid-19). Shell decided to focus on other projects they were working on in Indonesia.

Previously, the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) said that the plan to transfer participation rights by Shell still had to obtain the approval of the Minister of Energy and Mineral Resources (ESDM).

SKK Migas Deputy for Operations Julius Wiratno said the government did not interfere in discussions between Inpex and Shell. However, SKK Migas is still guarding to ensure that the discussion does not hamper the implementation of the Masela Block project.

"All the PI transfer processes must be based on the approval of the Minister of Energy and Mineral Resources. Regarding valuation and all business discussions between investors, we are not involved at all," said Julius

He added, Shell did not reveal another reason for the decision to release the participation rights in the Masela Block. Shell only stated that the distressed cash flow condition was the main reason for the decision. The Masela Block Abadi Project this year has entered the approval stage of an analysis of environmental impacts (Amdal).

Until April 2020, the process had reached 45.33396 from the target of 47.96% for the month. The Masela Block Project has also obtained a Decree (SK) for the Determination of Land Procurement Locations for the Abadi LNG auction port on June 1, 2020. The refinery is planned to be built in the Tanimbar Islands, Maluku. 

    Inpex has begun the front end engineering design (FEED) process for onshore LNG projects, floating production and offloading (FPSO), export gas pipelines, and subsea umbilical risers; and flowline (SURF). The project is targeted to operate in the second quarter of 2027, a year later than the initial target.

Kontan, Page-13, Thursday, July 9, 2020

SKK Migas Ensures that the Masela Project Still Runs Even Without the Shell

Shell Corporation, which is a participating interest holder (PI) in the Masela Block, is reported to be planning to leave the oil and gas block. However, the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) ensures that the Abadi LNG Project, the Masela Block will continue.

Dwi Soetjipto

SKK Migas Head Dwi Soetjipto admitted that his party had not yet received notification that Shell was releasing its 35% participating stake (farm out) in the Masela Block. The issue of Shell leaving the Masela Block will not stop the Abadi LNG Project. Inpex will continue the project.

the Masela Block

"KKKS (cooperation contract contractor) is committed to continuing the project," he said.

Meanwhile, SKK Migas Deputy for Operations Control Julius Wiratno added, so far, the farm out plan is still limited to discussions between Shell and Inpex as partners.

"There will be an approval from the Minister of Energy and Mineral Resources (ESDM) if it is certain [to release participating shares] right," he said.

The issue of Shell will sell its participation in the Masela Block is not the first time it appears. In May last year, this issue also surfaced following Shell's plan to release a number of assets that had generated the US $ 30 billion in funds. 

    From the sale of PIs in the Masela Block, at that time Shell was eyeing for funds in the amount of US $ 1 billion. However, the issue was denied by SKK Migas at that time.

Meanwhile related to the issue of Shell's withdrawal, Inpex Masela Ltd's Acting Corporate Communication Manager Moch N Kurniawan revealed, his party was not in a position to answer the commercial activities of the oil and gas company. He said he was still focused on developing the Abadi LNG Project, the Masela Block.

"As operators of the Abadi LNG Project and with the support of the Government of Indonesia, we are confident that this project will continue and we are actively working to implement a PoD (the plan of development) approved by the Government of Indonesia," said Kurniawan.

The Abadi Project is targeted to start operating in the second quarter of 2027. The project, valued at the US $ 19.8 billion, which is worked on by Inpex Masela Ltd, is projected to produce 150 MMSCFD of the pipeline through LNG and in the form of LNG 9.5 million tons per year.

Covid-19 affected

Meanwhile related to the progress of the Abadi LNG Project, Julius said, currently, the geological and geophysical survey activities were hampered due to the Covid-19 pandemic. At the end of March, Inpex was supposed to start mobilizing survey equipment but was eventually postponed due to Covid-19. 

    Until now, there is no certainty when the mobilization of tools and labor will continue. However, it is not certain that the delay in survey activities will make the target operation of the Abadi LNG Project backward. The reason is, this project has not been fully ongoing

"And [the process] is still long, because the target [operation] is 7-8 years. However, there will definitely be recovery efforts, "said Julius.

All parties are aware that the Covid-19 pandemic is hitting the oil and gas business, not only in Indonesia but also globally. Therefore, all companies also recalculated their business. The impact of the Covid-19 pandemic on the Abadi LNG Project was also disclosed by Dwi. 

    This impact is not only on project work, but also on gas marketing which is difficult because buyers still see the situation. However, he will try to prevent the project from backing down.

"We are still discussing with Inpex so that onstream does not retreat from 2027," he said.

In terms of gas marketing, so far, Inpex has only received a commitment to purchase gas by PT PLN (Persero) 2-3 million tons per year and PT Pupuk Indonesia (Persero) 150 million standard cubic feet per day / MMSCFD. At least, around 80% of the 9.5 million tons per year gas production must have a purchase commitment so that a final investment decision / FID can be achieved.

Based on SKK Migas data, as of last March, the work on the approval of the Abadi Project environmental impact analysis (Amdal) still reached 43.41% of the target of 47.27%. In addition, the auction process for front end engineering design / FEED of onshore liquefied natural gas / LNG refinery facilities, floating production, storage and offloading (FPSO) facilities, gas pipelines, and umbilical subsea facilities, risers, and flowline (SURF) is still ongoing.

Investor Daily, Page-10, Thursday, July 9, 2020

lnpex Focus on Masela

lnpex Masela Ltd. said it was still focused on developing Abadi Field, the Masela Block in the Arafuru Sea, Maluku. Act Corporate Communication Manager of lnpex Masela Moch N. Kurniawan said lnpex remained committed to continuing the Masela Block development project. With government support, lnpex believes the project to develop the offshore oil and gas block will continue.

Inpex Corporation

"We are actively working to implement the Plan of Development / PoD which was approved by the Indonesian government," he said.

Regarding the news of Shell's withdrawal plan in the Masela Block project, Kurniawan was reluctant to respond to this. He said it had no interest in explaining the news considering it had entered Shell's commercial activities.

"We suggest to immediately ask this to Shell," he said.

When confirmed separately, Shell Indonesia still chose not to comment related to its current position in the Abadi Field project in the Masela Block. 

Rhea Sianipar

    Rhea Sianipar, VP of External Relations of Shell Indonesia, previously said that it was reluctant to comment on the news of Shell's withdrawal from its partnership with lnpex. Meanwhile, Shell originally held 35 shares of participation in the project. The rest is held by Intex and regionally owned enterprises (BUMD) by 10%.

SKK Migas Deputy for Operations Julius Wiratno previously said that Shell had decided to withdraw from the project due to cash flow problems due to projects in other countries that were hampered.

"Inpex doesn't back down, which Shell resigns as a partner. "Everything is going to be taken over by lnpex or is looking for potential partners," he said.

However, later the statement was corrected.

"Until today Shell hasn't left yet, it's a B-to-b discussion / negotiation with lnpex and others. If the Inpex continues, "he said.

Bisnis Indonesia, Page-4, Thursday, July 9, 2020

Efforts to Find a Substitute for Shell in the Masela Block

Royal Dutch Shell Plc (Shell) has indeed not officially come out of the Masela Block Abadi Gas Project, Maluku Province. But that intention has been illustrated by Shell's request to open a data room block that was designed to have an LNG capacity of 9.5 million tons.

Deputy for Operations for the Special Unit for Upstream Oil and Gas Business Activities (SKk Migas), Julius Wiratno said that negotiations between Shell and Inpex Corporation as the holders of 65% participation in the Masela Block were still ongoing.

the Masela Block in Maluku Indonesia

Do not rule out the possibility, the negotiation process will lead to a recalculation of the investment value in the block. This is also supported by situations and conditions that occur where project work has not yet fully taken place.

"Until today Shell has not resigned, there is still a B to B discussion with Inpex. "However, Inpex will continue, the project must start even if it is stumbling, let alone the Covid-19 pandemic," Julius said.

Shell's plan to step down was seen when the company asked permission to open a data room. This step allows potential investors to see the potential of the Masela Block.

SKK Migas has also sent a letter to complete the request for opening the data room. Shell is said to be looking for partners to transfer 35% of its participating shares. However, Shell Indonesia's External Relations Vice President Rhea Sianipar was reluctant to comment on this.

"For the question above, I have no comment," Rhea said.

Until last night, Melia Relations Inpex Corporation Specialist Moch N Kurniawan had not answered Kontan's questions.

Kontan, Page-12, Tuesday, July 7, 2020

Energy Investment Requires Regulatory Certainty

Bad news comes from the Indonesian energy sector. During the Corona pandemic (Covid-19), two foreign investors in the oil, gas, and electricity sectors, Shell and Mitsui, planned to flee their project in Indonesia. 

    Royal Dutch Shell Plc (Shell) intends to leave the Masela Block Abadi Gas Project, Maluku. SKK Migas confirmed, Shell wanted to release 35% of its participation in the block, influenced by Covid-19.

the Masela Block Abadi Gas  Maluku Indonesia

Besides Shell, another foreign investor who wants to escape is Japan's, Mitsui Corp. Mitsui plans to leave the Paiton power plant project, East Java. Mitsui holds a 45.5% stake in the 2,045 megawatts (MW) plant.

The energy business is indeed experiencing a decline. See, the International Energy Agency (IEA) projects total global energy investment this year to fall to US $ 400 billion, down 20% year-on-year (YoY). Earlier this year, energy investment had grown by 2%.

Indonesia was affected. Economist Indef Bhima Yudhistira Adhinegara rate, the reason investors want to get out of Indonesia Iantaran see regulations that are not yet fully friendly and often change.

"They have invested long-term, but there is uncertainty regarding policies and regulations," he said.

Indonesia's competitiveness index in the IMD World Competitiveness Ranking 2020 dropped from rank 32 to 40. Therefore, Bhima said, there needs to be an improvement in the investment climate in the country. 

    The Masela Block project is indeed on a winding road. The process of negotiating, developing, and determining the investment commitment of the Masela Block has been very difficult, namely for more than two decades since 1998.

Inpex Corporation

In July last year, the government approved the proposal of Inpex Corporation, the manager of which holds a 65% stake in the Masela Block's participation. The block's investment value is around the US $ 19.8 billion.

Until now there are no prospective buyers of liquefied natural gas (LNG) that will later be produced from the Masela Block. On the other hand, the development of onshore refineries has not yet begun.

Indonesian Petroleum Asociation (IPA) Executive Director Marjolijn Wajong assessed that depressed oil prices also contributed to the decline in investment. Then the most likely thing to do is respect the contracts that have been made with the investors.

"If you want to change the contract, the government should discuss it first with investors," he said.

Oil and Gas Practitioners and Observers Tumbur Parlindungan hopes that the government will move quickly to improve the country's oil and gas investment climate so that investors will not be shunned after the Covid-19 pandemic.

"The way to provide investment certainty is through safeguarding the sanctity of contracts or contract sanctity as well as improving overlapping rules," he said.

    In the electricity sector, the Executive Director of the Institute for Essential Services Reform (IESR) Fabby Tumiwa believes that Mitsui's plan to leave the Paiton power plant signals that investment in fossil fuel-based plants is no longer attractive.

Mitsui's intention to leave could set a precedent in the electricity sector. Later, other investors will prepare similar options to mitigate investment risks in thermal plants. Therefore, Fabby called on the all-out government to encourage investment in clean energy and energy efficiency.

"The government must have a policy framework that provides certainty," he said.

Kontan, Page-1, Tuesday, July 7, 2020