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Jakarta Post

Onshore or offshore? Ministers clash on gas block development

  • Raras Cahyafitri

    The Jakarta Post

Jakarta   /   Fri, September 25, 2015   /  05:33 pm

Energy and Mineral Resources Minister Sudirman Said has defended on an initial plan for an offshore facility at the gas-rich Masela block after Coordinating Maritime Affairs Minister Rizal Ramli earlier suggested that an onshore facility would more efficient and sensible.

Sudirman argued that a floating liquefied natural gas (LNG) plant would be more in line with the administration'€™s maritime vision, because the project would boost the country'€™s maritime infrastructure.

'€œWe have a vision to support the maritime industry. Building the floating LNG plant will offer an opportunity for the shipping industry and national capacity will be increased,'€ Sudirman said, in reference to President Joko '€œJokowi'€ Widodo'€™s vision to make Indonesia the world'€™s maritime axis.

Sudirman'€™s plan contradicted the recent position staked out by Rizal, who argued for an overhaul of the development plan for the Abadi field at Masela block in Arafuru Sea by Japanese company Inpex.

Rizal argued that the development of the gas field should involve an onshore LNG plant on Aru island instead of a floating LNG plant in order to save on development spending. He also suggested that a 600-kilometer pipeline be established to connect the gas field and the Aru LNG plant.

The onshore scheme of development would cost less and have multiplier effects for the development of Aru island and the overall eastern part of the country, according to Rizal. Based on his calculations, an onshore scheme development would cost only between US$14.6 and $15 billion as opposed to the $19.3 billion listed for an offshore plant.

But the Upstream Oil and Gas Regulatory Task Force'€™s (SKKMigas) calculations differed from those of Rizal. SKKMigas revealed that an offshore floating LNG plant would need $14.8 billion in investment, while the onshore scheme would cost more than $19 billion.

This is not the first time that Rizal has contradicted government policy after the recently installed coordinating minister slammed the administration'€™s 35,000 megawatt (MW) electricity procurement program and argued that it ought to be trimmed down to 1,600 MW instead. The government, however, went ahead with the 35,000 MW goal.

According to SKKMigas chief Amien Sunaryadi, both onshore and offshore schemes would need a processing vessel to operate on the sea. The difference between them was that the offshore scheme would need a bigger vessel to liquefy the gas into LNG. Meanwhile, under the onshore scheme, the vessel would only separate the gas and condensate before delivering the gas through a pipe to be then liquefied in an onshore LNG plant.

'€œNon-engineering matters will also have to be considered for an onshore development, such as the land clearing process,'€ Amien said.

He added that SKKMigas was now also in discussions to request a certain level of local content for the Masela plan of development so that it would contribute to developing and strengthening the shipyard industry in Indonesia.

The Masela block is currently operated by Inpex, which holds a 65 percent stake. The remaining 35 percent is held by Shell. Inpex recently submitted a revision in the Masela plan of development following the discovery of large gas resources.

Under the revised plan, Inpex proposed to increase the capacity of the floating LNG plant to 7.5 million tons per year from 2.5 million tons. As much as 10.7 trillion cubic feet in gas reserves is estimated to reside in the block.

Given its geographical location, the Masela deepwater project is said to be one of the most challenging projects in the country.

Before Rizal'€™s remarks, SKKMigas had issued a recommendation approving Inpex'€™s development plan under a floating scheme. The recommendation is currently being reviewed by the Energy and Mineral Resources Ministry. '€œThe ministry is expected to decide by Oct. 10,'€ secretary general Teguh Pamudji said.

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