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Indonesia upstream agency says Energy Minister will decide on PoD of Masela Block, FLNG more efficient

JAKARTA ( – The Head for Special Task Force for Upstream Upstream  Oil and Gas Business (SKK Migas) Amien Sunaryadi assures that the one who has the authority to approve the plan of development (PoD) of giant Masela Block in the Arafura Sea is the Energy and Mineral Resources Minister (ESDM).

“In line with existing procedure, Inpex (operator of Masela Block) submits (PoD) to SKK Migas, then SKK Migas reviews it and then gives recommendation to the ESDM Minister. The decision is in the hands of the Minister for Energy and Mineral Resources. The one who has the authority is the ESDM Minister,” Amien said at a press conference on Tuesday.

He also argues that it is more efficient to build floating LNG facility than to build onshore refinery plants as happens in other parts of the world.

He said the truth is that the cost to develop the massive FLNG facility for Abadi Field within Masela Block is around US$14.8 billion, compared to developing onshore refinery plant which will cost US$19.3 billion.

The SKK Migas Head made the statement in response to the statement made by the Coordinating Minister for the Maritime Affairs and Resources Rizal Ramli on late Monday.

Rizal Ramli called on the Energy and Mineral Resources Ministry and the Special Task Force for Upstream Oil and Gas (SKK Migas) to push Inpex Corporation to develop onshore LNG plant, instead of developing floating LNG facility (FLNG) as currently being proposed by Inpex.

He argues that the development of onshore LNG pant will stimulate the development of Aru Island, just like Balikpapan town in East Kalimantan, which benefited from the development of Mahakam block and other oil and gas blocks in East Kalimantan. He also said the development of onshore facilities will cost less, at around US$14 billion, instead of US$19 billion to develop offshore facilities (FLNG).

“Balikpapan developed into a large town, thanks to Block Mahakam development by Total. If we build gas pipeline to Aru Island, principally, we are building a new city in the next ten years, as big as Balikpapan,” he said.

Early this month, SKK Migas has received final draft revision of the Plan of Development (PoD) of Abadi Field within Masela Block from Inpex Corporation.

Inpex has requested to revise the PoD of the block as it aims to double the capacity of its floating LNG vessel (FLNG) from 2.5 million metric tons to 7.5 million metric tons. The decision was made following the discovery of additional gas reserves in the area. Inpex plans to add one more train to three units with an estimated mammoth investment of US$14 billion.

The size of the FLNG is almost four times the size of a soccer field.

The Abadi Field in Masela Block was originally planned to start commercial operation in 2017, then it was delayed to 2018, 2019 and now Inpex said it will be delayed to 2024. This means that the project has been delayed for seven years.

Amien Sunaryadi said if the operator of the block develops onshore refinery, it will cost more and could take longer time to clear and settle the lands.

Amien Sunaryadi said the country has no luxury to delay the project anymore. If Masela block continues to be delayed, Indonesia could lose out to LNG projects that are being developed by the Australian companies such as Gorgon, Itchis and Prelude fields in northern corridor of Australia.

Many oil and gas projects in the country have been delayed, partly due to land clearing delay, as the case of Cepu Block. It take years to clear the land, and at the end, the operator could not clear the total land it needs, so it moved part of the facilities to offshore by deploying Floating Storage and Offloading (FSO) Vessel.

“They will come onstream very soon. If the production of Masela Block is delayed again,  the (LNG) market will lose out to the Australian blocks,” Amien Sunaryadi said.

Initially, Inpex will develop Abadi Field within Masela Block with estimated production of 421 million standard cubic feet per day (MMSCFD) and oil of 8,400 bpd.

Inpex currently holds working interest of 65 percent in the Masela Block, while Shell holds the remaining 35 percent.

Apart from submitting revision of its PoD,  Inpex is also looking to extend its production sharing contract to 2048, beyond existing contract of up to 2028. The problem is that under the current regulation, a PSC holder can only seek contract extension from 10 years before the contract ends. This means Inpex would only be allowed to seek contract extension after 2019.

The government is currently seeking ways out to respond to the Inpex request. Inpex has argued that given the huge investment, the development of the block would not be efficient and the time is short for the operator to recover its investment. (*)


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