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Jakarta Post

No deal yet on cost of LNG project in Maseka Block

  • Stefanno Reinard Sulaiman

    The Jakarta Post

Jakarta   /   Wed, March 27, 2019   /   01:46 pm
No deal yet on cost of LNG project in Maseka Block An offshore platform is in operation at the Masela Block in the Arafura Sea. (Courtesy of/maritim.go.id)

The government and Japan’s Inpex Corp have not yet agreed on the cost of a liquefied natural gas (LNG) plant to process gas from the Masela Block.

In February, the proposed figure was at US$16 billion for the onshore plant, higher than the initial estimate of $14 to $15 billion, when the project was conceived as an offshore facility.

Upstream Oil and Gas Regulatory Task Force (SKK Migas) chairman Dwi Soetjipto said recently that the cost of an onshore project should be lower than that of a floating LNG facility.

He said SKK Migas was still discussing the revised plan of development (PoD) with Inpex Corp, the operator of the Masela Block.

“We certainly want to complete it as soon as possible, but we can’t do that if the capital expenditure is too high,” Dwi said, adding that such a high cost would not leave the government much room to provide an incentive for the operator.

The contract for the Masela Block is still of the cost-recovery type, meaning the government has to shoulder the cost of the block’s operation.

“If the capex is too high, we can’t give big incentives to the investor,” he said with reference to Inpex, adding that the incentives could be in the form of a tax holiday, credit investment or an additional split for the operator.

Previously, SKK Migas had appointed private consultants, reportedly Australian-based energy company Energy World Corporation (EWC).

He further said the LNG project was estimated to produce 150 million standard cubic feet per day (mmscfd) of LNG and already had a petrochemical company as a potential buyer. He said the discussion with Inpex also included the issue of extending the contract, which would expire in 2028. (bbn)