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More govt clashes over Masela block development
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Visitors examine a model of a gas processing facility during the Indogas Exhibition in Jakarta on Tuesday. The Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) unveiled several gas-sale agreements at the event, which will net around US$617 million for the state. (JP/Ricky Yudhistira) (The Jakarta Post/Ricky Yudhistira)
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he design of the upcoming Masela gas-block development has not been decided, presidential spokesperson Johan Budi said, refuting Coordinating Maritime Affairs Minister Rizal Ramli’s statement that the government had decided on an onshore scheme for the development.
According to Johan Budi, President Joko "Jokowi" Widodo was currently reviewing all aspects of the project. Given the scale and the complexity of the project, he said, decisions must be made cautiously.
"The President is going to consider many aspects [of the project], not only the commercial and technical aspects, but also social, cultural and economic aspects, as well as development in the region," he said in a press statement on Tuesday in Jakarta.
At this time, Johan continued, the President had taken in feedback and concerns about the ‘pros and cons’ of the project from a variety of parties; from those supporting onshore development and those supporting offshore development.
"The President's main concern is how people in South Maluku, and Maluku in general, receive maximum benefit from the Masela gas project. But, of course, [how the project can] also provide maximum benefit for the country," he added.
Earlier, Rizal claimed the decision to develop Masela onshore had been cautiously taken after a thorough discussion with many parties. "The main consideration is the government's awareness of the multiplier effects and the acceleration of economic development, especially in Maluku, and eastern Indonesia in general," Rizal said in a statement.
According to the ministry data, the approximate cost of onshore refinery construction is US$16 billion, cheaper than the $22 billion if the refinery is built offshore.
However, Rizal said that the above figures differed from the cost estimations given by project contractors Inpex Corp and Shell. They have stated that offshore construction would cost $14.8 billion, while onshore construction would be $19.3 billion.
"Inpex and Shell have overstated the cost of onshore construction and understated the cost of offshore construction. We have challenged them to discover the truth," he said.
In a bid to prove their good faith, Rizal further said that the government had challenged them to conduct the offshore development using their own finances without requenting any cost recovery.
"It turns out, Inpex did not dare [take on the challenge]. This shows they are not sure of their own estimation," he added.
According to Rizal Ramli, who was finance minister under former president Abdurrahman Wahid, if the refinery construction was carried out through an offshore scheme, Indonesia would only receive an income of $2.5 billion a year in liquid natural gas (LNG) sales, assuming an oil price of $60 per barrel.
In contrast, he said that if the project development was carried out through an onshore scheme, the project would have multiplier effects on fertilizer and petrochemical industries around the development area, leading to revenues of up to $6.5 billion a year.
"This explains why the President wants to build an onshore refinery. He is very concerned about its greater benefits and multiplier effects. We can develop a new Balikpapan city in Selaru, located 90 km from the Masela block," Rizal explained. (ags)
