ASEAN KEY DESTINATIONS
Govt wants to run two projects in Masela
In the latest chapter in the gas-rich Masela block saga, the government says it wants to run two projects, following a recent meeting with the block’s contractor.
The projects will consist of gas-drilling activities and the development of downstream businesses, said acting energy and mineral resources minister Luhut Pandjaitan at the Presidential Palace complex on Tuesday.
He met with President Joko “Jokowi” Widodo to inform the latter about his recent trip to Japan, where he met a number of executives of Japanese oil and gas company Inpex, including CEO Toshiaki Kitamura.
Inpex, along with Anglo-Dutch oil and gas firm Shell, are the current contractors at the block. While Inpex holds a 65 percent stake, Shell controls the remaining 35 percent.
Luhut claimed Inpex expressed appreciation for the progress in ongoing discussions about Masela’s future, adding that both sides agreed “to seek the middle ground”.
“We will not carry it out sequentially, but concurrently, in the hope that the Masela construction can be started any time in 2019,” he said.
As reported before, Inpex and Shell were put in the spotlight after Jokowi decided in March that the project must be developed according to an onshore scheme, dropping the initial offshore scheme.
At the time, Jokowi said an onshore development would garner greater benefits for the economy at both national and local level. His administration has demanded that the companies revise their plan of development (POD) once again and to complete it before the end of the year.
The original POD for an offshore scheme was submitted by Inpex and Shell in 2010, but the discovery of more extensive resources led contractors to submit a revised POD last year to adjust the floating liquefied natural gas (LNG) plant’s capacity to 7.5 million tons per year, up from 2.5 million tons.
With the existing POD in hand, it was estimated that the gas field could start production by 2024.
This has led to predictions that the gas field will only start operating in 2026, just two years shy of Inpex and Shell’s contract expiration.
Meanwhile, Luhut declined to go into details regarding the location of the block’s LNG plant, but said the President would soon give his approval.
“All the details are currently being calculated by both sides and they involve intensive meetings two to three times a week,” he added.
In terms of costs, the government says it believes work on the Masela block will cost less than before, lower than the US$22 billion previously projected, thanks to a drop in global oil prices and reductions in material costs.
The Energy and Mineral Resources Ministry itself estimates that the approximate construction cost for an onshore refinery is around $16 billion.
However, the government has yet to decide the type of downstream businesses to be established in Masela as it mulls over establishing petrochemical and fertilizer facilities.
Inpex senior communications and relations manager Usman Slamet said it was thankful for the government’s project and was looking forward to the immediate start of the Masela work.
Separately, Fabby Tumiwa, Institute for Essential Services Reform (IESR) executive director, argued that the entire Masela project was still unclear and that the explanations were merely empty words.
In order for the work to run smoothly, all components, including future downstream businesses, must be contained in a POD. “The POD itself doesn’t exist,” he said.
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