Jokowi Opts for the Onshore LNG Development Scheme

KATADATA - After almost seven months, Indonesian President Joko Widodo (Jokowi) has finally opted for the onshore development scheme for the Masela Block in the Arafura Sea.

“Having weighed everything up, we have chosen the onshore option, “said Jokowi in an official recorded statement obtained by Katadata, Wednesday (23/3). 

Jokowi said two factors had underpinned this decision. First, the government wants the regional economy and the national economy to benefit from the development of the Masela Block. It also wants this development to enable the local area in Maluku to develop too.

The energy minister Sudirman Said said that the ministry would immediately follow up on this decision. Official letters would soon be sent to the block’s investors Inpex and Shell. “We will tell the investors to revise all their proposals because the investment decision has to be made by 2018 at the latest,” he said.

Sudirman said that the revisions would delay the project a little, but that he would ask the government’s Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), to have more detailed discussions with Inpex and Shell to avoid a prolonged delay. 

Although Sudirman has argued that the offshore floating liquefied natural gas (FLNG) option would be more beneficial, he will stand by the President’s decision and do what is needed to take it forward. He said that the President had made his decision after an exhaustive examination of data and information collected from all stakeholders and with due consideration of all aspects, including regional development.

The development of the Masela Block has been a point of contention since September last year, when coordinating maritime affairs minister Rizal Ramli objected to the SKK Migas recommendations for the development of the block, which approved the revised plan of development submitted by the block’s operator, Inpex Corporation. 

In its revised proposal, Inpex changed the capacity of the FLNG option from 2.5 million tons over 30 years to 7.4 million tons over 24 years. Thanks to newly discovered reserves in the field, the initial figure of 6.05 trillion cubic feet (tcf) had increased to 10 tcf. Despite this, Rizal insisted that the FLNG option would not be right for the block, and that to accelerate local development in Maluku, refineries should be built on shore.

The head of SKK Migas Amien Sunaryadi disagreed, however. He argued that the offshore floating liquefied natural gas option would be most financially viable. He argued that this option would be less expensive than building onshore refineries. The offshore option was also favoured by the energy minister, Sudirman Said.

Amien said that the cost of the FLNG option was US$ 14.8 billion, compared with US 19.3 billion for the onshore refinery option. Also, the offshore option would generate more state revenue. Over 24 years, US$ 51.76 billion would go to the state whereas the onshore option would generate only US$ 39.59 billion. 

(Read more: EMR Ministry chooses Offshore Development Scheme for Masela Block & Masela Block Polemics: Conflict between Rizal and Sudirman continues)