T

he debate over two development concepts for the giant Abadi gas field in the Masela Block has attracted public attention for the last three months since Coordinating Maritime and Energy Resources Minister Rizal Ramli challenged the existing concept of a floating liquefied natural gas (FLNG) plant.

He believes that the FLNG will be more expensive and contribute less to the nation'€™s development than the onshore liquefied natural gas (ONLG) concept.

The differences between these two concepts can be summarized as follows: the concept of FLNG is to build a floating LNG plant, which will be placed in the middle of the sea, above the production wells in the Abadi field located 700-1000 meters below sea level.

While with the concept of OLNG, the LNG plant is placed on an island. This gas field is located around the Aru Islands near the border between Indonesia and Australia, therefore it would need about 150-500 kilometers of gas pipeline to the coast (depending on the island where the LNG plant would be located).

With the FLNG, all production facilities, including a refinery for processing the LNG, would be placed on a platform or on a large ship. While with the concept of OLNG, the gas from the wells is initially purified on a floating, production, storage and offloading (FPSO) platform, then the clean gas is piped to shore for processing into LNG in a land-based LNG plant.

In the debate, FLNG advocates claim its construction is quicker (with a '€˜module'€™ system) because it does not require land acquisition that usually costs more in terms of funding and time.

It does not require the construction of pipelines to transport the gas and condensate to shore. Such a project would also not encounter too many social and environmental issues because it would not be in direct contact with the public.

While the proponents of ONLG also claim that this facility would cost less with a greater domestic content, as well as creating broader multiplier effects such as housing, markets, hospitals, airports, schools, transportation, workshops etc.

With the LNG plant built on land more people and businesses are involved. In addition, the petrochemical industry is expected to produce raw material or fuel gas that can be consumed directly onshore without having to build a regasification unit.

However, this author does not want to join this debate, because their assumptions are very dynamic and depend on different perspectives.

For example, the cost of capital (investment) and operating costs and the multiplier effects for these two concepts will differ from one source to another.

So, whatever the decision later ... the most important question to be answered is, are there any buyers?

To examine these two concepts, the question is whether we can empower our shipyards in Indonesia (for the FLNG option).

Are we ready to produce pipes that can be installed in the sea for a long period of time (for the ONLG option)?

Do we have engineering, procurement and construction (EPC) contractors that can build on time, on budget and on spec. Do we have sufficient human resources ready to run offshore technology for the FLNG option?

If these basic questions cannot be answered clearly, whatever the choice, the greater benefits will go to foreign parties, not the government and people of Indonesia.

Fortunately, there is an alternative solution other than these two extreme concepts, namely floating compressed natural gas (FCNG).
In this concept, we still build a floating facility but not to make LNG, rather CNG.

It is a simpler concept and significantly less costly, since the floating facility is basically only a compressor to pressurize the gas.

Compared to the LNG process, the volume of CNG is twice as large, since in the LNG process the gas is cooled to an extreme temperature in liquid form.

However, in terms of technology, the process of making LNG is more complicated since it requires cooling to minus 165 degrees Celsius to transform the gas into liquid.

Therefore, in terms of operational complexity, these two concepts (LNG vs CNG) are very different. Moreover, if this is associated with a floating facility, the FCNG is more practical and reliable.

The benefits of the FCNG concept include construction speed and cost of investment. This concept is similar to OLNG, but does not need a gas pipeline to shore.

The pipeline is replaced with CNG vessels, often referred to as a '€œvirtual pipeline'€.

In terms of time and cost, the comparison between building CNG ships and installing pipelines and building an onshore LNG plant is very different.

With FCNG, gas coming from the well would be processed (purified) on the FPSO platform, as with ONLG. Then the clean gas will be compressed at high pressure and put on CNG ships to be distributed to the consumers.

CNG consumers are also the users of regular natural gas, such as power plants (PLN, private power plants), fertilizer plants, petrochemical producers and others.

The advantage of CNG is that it can be directly used by consumers, as it does not need regasification like LNG. By doing so, this concept can reduce costs by almost half and take less time than would be required to build LNG (FLNG and ONLG) plants.

The limitation of the FCNG concept is its CNG volume. As it is shipped over long distances then it may be less economical because of its smaller volume compared to LNG, so the shipping costs per unit of volume will be more expensive.

Similarly, when there are problems with consumers, or there is over-supply, the CNG cannot be stored in tanks, unlike the LNG in liquid form.

However, fortunately, we have LNG assets that are currently facing a decline in gas supply, namely PT Badak NGL.

So, if we want to export the gas from the Masela Block, we can use the facilities of the Badak LNG plant in Bontang, East Kalimantan, as a processing facility for Masela LNG from gas that has been in the form of CNG.

Thus, Masela gas can be sold not only to the domestic market, but also on the international market.

In addition, we also can develop power plants on the islands fueled by CNG.

The fertilizer and petrochemical industries can also be built on other islands as required, not only those in the proximity of the Aru islands. And, all of that would be more affordable by supplying CNG using smaller ships designed and built in Indonesia.

The maritime industry would grow rapidly and the maritime highway idea would also be realized.

However, since this is about the gas business, the commercial aspects should first be resolved.

We have to ask who the buyers will be, how much demand, and at what price and for what period of time. The contract of sale, the gas sales agreement (GSA), for this gas must be decided before the Masela Block is developed.

So, whatever the decision later (FLNG, ONLG or FCNG), the most important question to be answered is, are there any buyers?

If this is not immediately decided, then we should not be surprised if the domestic and international markets are flooded by LNG from Australia, Qatar, Angola, Mozambique and other emerging LNG producer countries.

If that happens, then the Masela Block may never be economically developed because of uncompetitive costs and a market glut.