President Jokowi decides Masela production facilities to be built onshore

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JAKARTA (rambuenergy.com) – President Joko Widodo (Jokowi) said production facilities of giant Masela LNG project will be built onshore, instead of offshore (floating LNG).

“After receiving various inputs and that since this is a long term project involving hundreds of trillions of rupiah, therefore based on calculations and considerations that I have made, we have decided to be built onshore,” President Joko Widodo said.

He said the government hopes the development in the Maluku province will get benefit from the Masela project.

Inpex Corporation of Japan said recently it is still waiting for the approval of the revised Planned of Development (PoD) of Abadi Field within Masela Blcok and hopes that the government would give clear direction so that the project can be continued.

“Once the government approved the revision of the plan of development one (PoD 1), which will hopefully in line with our expectation, Inpex and Shell will immediately move on to the next stage of development, namely the FEED (front-end engineering design) stage,” Inpex said in a statement.

The approval of the revised PoD I was supposed to be given in September of last year, however, until now the approval is yet to be given amid controversy whether the production facilities should be built offshore (FLNG) or onshore.

The key PoD proposed by Inpex was developing offshore facilities, namely Floating LNG (FLNG), instead of onshore plant. Developing onshore facilities are considered to be too costly and inefficient.

However, the public has been divided over the location of the processing facility. Coordinating Minister for the Maritime Affairs Rizal Ramli has been pushing the government to approve developing onshore processing plant, instead of Floating LNG.  Maluku provincial government has also demanded that the processing facilities are built onshore.

Minister for Energy and Mineral Resources (ESDM) Sudirman Said told reporters after the meeting that all arguments have been put on the table, the pros and cons of building FLNG and onshore production facilities, including the investment to develop the Masela block.

He said the investment to build offshore processing facilities through FLNG is estimated to reach US$14.3 billion, lower than developing onshore processing facilities in Tanimbar Island, which amounting to US$19.8 billion. If onshore facilities are built in Aru Island, the costs would be even higher at US$22.3 billion.

The Abadi Field project would take several years before it could come onstream. Design engineering and final investment decision (FID) will take place in the next three years and if things go ahead as planned, the construction would begin in 2019 and then would come onstream in 2023-2024.

The existing operator’s contract to develop the Masela block will expire in 2028. Inpex has earlier requested the government to extend its contract to another 20 years after 2028.

Currently, Inpex holds 65 percent working interest in Masela Block and the remaining 35 percent is held by Shell.

The block contains huge gas reserves of around 10.7 trillion cubic feet (tcf). Block Masela covers 4,291.35 square kilometers area, about 800 km to the east of Kupang town, the capital of NTT and over 400 km from Darwin, Australia at water depth of 300-1,000 meters. (*)