Argus: Tokyo Seeks Extension of Indonesia Gas Concessions

Japanese premier Shinzo Abe has expressed to Indonesian president Joko Widodo the need for co-operation in getting an extension of production-sharing contracts (PSCs) for the offshore Masela and Mahakam upstream blocks, which are key natural gas supply sources to Japan's long-term LNG supplies.

Widodo met Abe yesterday to discuss security issues and bilateral economic co-operation as part of his seven-day tour this week to Japan and China. Abe and Joko discussed further enhancing resource partnership in oil, natural gas, coal and mineral resources. The Japanese leader in particular asked the Indonesian president for co-operation in winning a PSC extension of the two offshore blocks, Masela and Mahakam, which Japanese upstream firm Inpex has 65pc and 50pc stakes in respectively.

Inpex, the operator of the Masela block, is in talks with Indonesian authorities on whether to expand production targets for the proposed 2.5mn t/yr Abadi floating LNG (FLNG) development project. A possible expansion is likely to delay the project's targeted start-up in 2018, which will further limit production period to generate good investment returns for the $14bn FLNG project. The current PSC expires in 2028.

Abadi and Australia's 8.4mn t/yr Ichthys, both operated by Inpex, will be the key LNG supply sources for Japan in the coming years, along with new supplies from North America. Inpex, owned 18.94pc by the government, is leading the country's overseas upstream hunt, hoping to raise its oil and gas output above 1mn b/d of oil equivalent (boe/d) by the early 2020s. The firm's oil and gas output currently stands around 400,000 boe/d. MORE