"We already have a solution," Luhut said.
Jakarta (ANTARA News) - Coordinating Minister for Maritime Affairs and Natural Resources Luhut Binsar Panjaitan said a way out has been found over pending issue in negotiation with Inpex Corporation, the operator of the Masela gas block.

"We already have a solution," Luhut said after a meeting with Energy and Mineral Resources (ESDM) Minister Ignasius Jonan and Deputy ESDM Minister Arcandra Tahar here on Monday.

Last week Luhut met with Managing Executive Officer of Inpex Kenji Kawano to discuss the companys requests.

"We discussed details of two pending issues in the contract . Discussion of the two items have been almost final but there are still minor differences," he said after the meeting with Kenji .

The two items are about compensation in length of contract and the capacity of the LNG plant to be built as a result of the change in location of the LNG plant, he said.

Inpex asked for an addition of 10 years to its contract in compensation for the change in the location of LNG plant as asked by the government.

The government wants the LNG plant to be built on shore instead of off-shore as originally agreed.

"An addition of 10 years, however, is not possible. We are looking for an acceptable figure (for the additional length of contract)," he said.

On Monday, Luhut said a solution had been found but he refused to elaborate .

"It is yet to be reported to the president before being discussed at a limited cabinet meeting," he said.

Inpex said it needs an extension of contract to reach an economic value and reasonable investment level.

The existing contract of Inpex in Masela is to expire in 2028 with the capacity of the LNG plant at 7.5 million tons per year.

Inpex wanted a larger capacity for the LPN plant at 9.5 million tons to increase the internal rate of return (IRR), but the government said the capacity should be in proportion with the size of the reserve in the Abadi field.

Jonan said the government does not agree with Inpex request to increase the LNG regasification capacity to 9.5 million tons a year (mtpa).

"The plan is 7.5 mtpa. There is, however, request from the industry ministry that part of the production is set aside for downstream industry . Therefore, the capacity would larger than 7.5 mtpa but not much higher," he said.

As for the request of Inpex for addition of 10 years to its contract, Jonan said it has yet to be decided.

"It is still being calculated. The final would be reported to the president," he said.

Arcandra said the government agreed with compensation in the length of contract for the operator of countrys largest gas block, but not 10 years.

"We will give (compensation) but not 10 years," he said.

Inpex has also asked that internal rate of return (IRR) is at least 12 percent or 15 percent as Ipex target

Among the incentives the company has proposed included extension of contract for the development and operation of the Masela block to 30 years or an additional 10 years as a compensation for the change in the location of the LNG plant from offshore to on-shore, and a tax holiday of 15 years.

Inpex also asked for cost recovery of US$1.6 billion and larger production share.(*)

Editor: Heru Purwanto
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