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Fixing Masela gas project, Jokowi’s second costly blunder
The Masela gas project originally was to cost about US$15 billion, but now it reportedly has reached $20 billion, due to the President’s wrong judgment.
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Energy and Mineral Resources Minister Ignasius Jonan (right) shakes hand with Inpex Corp. CEO Takayuki Ueda (left) in Tokyo on Monday after they agreed in the final plan of development (PoD) of the gas-rich Masela block in the Arafura Sea. (Courtesy of/ESDM Ministry)
T
he government may have to borrow up to US$1 billion from Japan to revive the Masela gas project in South Maluku, which has been stalled largely because of President Joko “Jokowi” Widodo’s decision to change the fundamental operating principle of the gas exploitation six years ago. Indonesia does not only have to accept the loans but will also see another long delay because the project may have to start from square one.
This will be a good lesson for the next president of Indonesia who will be elected on Feb. 14, 2024. Whoever succeeds Jokowi should be able to control his/her desire to undermine the legacies of the previous government just to impress the nation.
Luckily President Jokowi has learned from the mistakes he committed during the early years of his administration.
This will be the second, maybe even the third, embarrassing experience for the President in dealing with Japan, after the Jakarta-Bandung high-speed railway project.
In their bilateral talks in Tokyo on July 27, President Jokowi and Japanese Prime Minister Fumio Kishida agreed in principle to revive the Masela gas project. The President reportedly agreed to buy 35 percent of participating interest in the project after PM Kishida offered an official loan through Japan Bank for International Cooperation (JBIC). Its value is estimated at between $800 million and $1 billion.
Jokowi then instructed state-owned oil and gas company Pertamina to explore the possibility to buy the 35 percent shares from Shell. Investment Minister/ Investment Coordinating Agency chief Bahlil Lahadalia said apart from Pertamina, the state-owned wealth fund Indonesia Investment Authority (INA) was also another potential buyer of the stakes.
The project was originally set to cost about $15 billion, but now it reportedly has reached $20 billion. The President’s wrong judgment could cost $5 billion. To reinstate the project, Indonesia has to buy 35 percent participating interest in the project – and even when it agrees, the negotiation will not be easy because many readjustments must be made. Many things have surely changed after six years.
