Masela Development Approval Nears

The Indonesian government is set to approve Japanese Inpex Corp's revised plan of development for the Masela natural gas block next week, the chairman of the country's upstream oil and gas regulator SKK Migas said on Wednesday.

The government is expecting Inpex to submit the plan for the $20 billion gas project this week, Dwi Soetjipto, the SKK Migas chairman told reporters in Jakarta.

Approval of the development plan would let Inpex, which controls 65% of the project, start planning for construction of the onshore liquefied natural gas (LNG) processing plant after years of delay.

Inpex had to scrap an earlier development plan after the government ordered the company in 2016 to move the project from an offshore LNG development to inland to have a larger impact on the local economy.

"We target to have the plan of development approved by the end of June," Soetjipto said, if Inpex submits the revised plan to his office this week.

Over the past weekend, Inpex and the government signed a heads of agreement for the project, also known as the Abadi LNG plant, which covers estimated costs, targeted project period and fiscal conditions, Inpex President Takayuki Ueda said.

Soetjipto said the government will have at least 50% of the production split from the Masela block, which is expected to have the capacity to produce 9.5 million tonnes of LNG a year.

Indonesia's Energy and Mineral Resources Ministry said the Masela investment is estimated to reach between $18 billion and $20 billion.

The government has agreed an 15% internal rate of return for Inpex's Masela investment, the SKK Migas chief said.

The government is targeting to have the plant up and running by 2027, he said, adding that Inpex has been given an initial agreement on a 27-year contract extension out to 2055.

Soetjipto said Masela is an important project and hopes Inpex's investment would attract more investors into the eastern part of Indonesia.

Royal Dutch Shell controls 35% of the project but industry and banking sources said in May it is moving to sell the stake, part of the major's asset disposal program that has raised more than $30 billion.

Soetjipto said on Wednesday that Shell is still part of the Masela consortium.

(Reporting by Wilda Asmarini; Writing by Fransiska Nangoy; Editing by Tom Hogue)