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January 9, 2009

Japan’s Inpex to build $19.6bn LNG plant in Indonesia

Indonesia has agreed to a proposal by Japan's Inpex Holdings Inc to build a floating liquefied natural gas (LNG) plant, a project worth an estimated $19.6 billion.

Reuters quoted Evita Legowo, the director general of oil and gas at energy ministry as saying Thursday that Indonesia in principle has agreed to Inpex proposal although it is still evaluating the economic value of the project.

Inpex, which made the proposal in May, estimates there are more than 10 trillion cubic feet of natural gas reserves in its Abadi field in the Timor Sea, potentially one of Indonesia's biggest fields.

If confirmed, it would make the project the second-biggest new gas field after the Tangguh project in Papua, which has combined reserves of 14.4 tcf.

"We hope to give the approval in March or April. The plant is expected to produce LNG in 2016," Legowo said.

Indonesia's energy watchdog BPMIGAS has said previously that Inpex will build one LNG train with capacity of 4.5 million tonnes a year.

Indonesia is pushing oil and gas companies to accelerate exploration and production, as production from its ageing fields has dwindled, and it wants to reduce expensive imports.

The Japanese firm is currently the sole operator of the Abadi gas field in the Masela block in eastern Indonesia. Indonesian state oil firm Pertamina is seeking a 30 percent participating stake in the project.

Pertamina wants to expand its upstream activities and is looking at several potential gas fields in the country, in addition to Inpex's field in the Timor Sea, to boost its gas reserves and production.

Indonesia, the world's number-three LNG exporter after Qatar and Malaysia, is increasing its use of energy sources such as natural gas to reduce oil use because of high prices and dwindling domestic supply.

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