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Jakarta Post

Minister calls for review of Masela block

  • Raras Cahyafitri

    The Jakarta Post

Jakarta   /   Tue, September 22, 2015   /  05:40 pm

Coordinating Minister for Maritime Affairs Rizal Ramli has called for a review of the development of the Masela gas block, a move which might further delay the construction of the country'€™s largest deepwater gas project.

After a meeting with representatives from the Energy and Mineral Resources Ministry and the Upstream Oil and Gas Regulatory Task Force (SKKMigas) on Monday, Minister Rizal said the development of the gas block should be linked to an on-shore liquefied natural gas (LNG) plant instead of an offshore floating plant as currently proposed by the block'€™s operator, Inpex Corp.

Rizal said the onshore LNG plant should be built in Aru island to store and process the gas from the block. A 600-kilometer pipeline network should also be built to connect the LNG plant and the gas block.

The development of an onshore LNG plant and pipeline would be cheaper than the construction of an offshore floating plant, he said, adding that the construction of the floating plant would cost about US$19.3 billion while that of the onshore plant would amount to between $14.6 billion and $15 billion.

'€œMoreover, by building the plant onshore, it could turn Aru island into a major city,'€ said Rizal, who took up his post in August, adding that the operation of the plant would also provide jobs and boost the local economy.

'€œWe are asking the Energy and Mineral Resources Ministry and SKKMigas to conduct a thorough evaluation of whether it is better to have a floating plant or pipeline,'€ he said.

Rizal'€™s comments regarding the Masela block was one of the policy changes he has proposed since his appointment, having previously called for a review of the government'€™s 35,000 MW electricity generation plan, which he has described as unrealistic.

The development of the Abadi field at the Masela block, which is located in the Arafura Sea, is expected to become the biggest deepwater gas project in the country, with an estimated 10.7 trillion cubic feet of proven reserves.

Figures from Inpex show that the block has a surface area of about 3,221 square kilometers and varies between 400 meters and 800 meters in depth. Given the geographical location, the Masela deepwater project has been described as one of the most challenging projects in the country.

Inpex submitted to SKKMigas earlier this month a revision to its Masela plan of development (POD). The revision involves the development of a floating LNG plant with 7.5 million tons per year in processing capacity, higher than an initial plan of 2.5 million tons. The company has yet to reveal the size of investment required.

'€œWe understand that the revised POD is currently under review by the government,'€ said Usman Slamet, Inpex'€™s senior manager of communication and relations, when asked for his comments regarding the coordinating minister'€™s statement.

SKKMigas deputy for operational control Muliawan said the task force had assessed the revised POD and had submitted a recommendation to the Energy and Mineral Resources Ministry.

'€œThe recommendation stated that the development based on floating LNG is accepted. The energy and mineral resources minister will assess whether the calculation is correct. SKKMigas only sees the technical and economics side but cannot assess -like Pak Rizal- the wider multiplier effect on Aru,'€ Muliawan said.

Under an initial plan, development of Masela, which is 65 percent owned by Inpex and 35 percent by Shell, was due to be completed by 2018. Under the revised plan, according to Muliawan, completion is scheduled for 2024.

Energy and Mineral Resources Ministry director for upstream Djoko Siswanto said further adjustments in the development plan would again delay the project.

'€œThe assessment of the floating LNG mechanism has been completed. If it is changed to a pipeline scheme we will need even more time,'€ Djoko said.

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