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Indonesia, Inpex still at odds over Masela block LNG plant capacity

BP Tangguh LNG plant (Photo: RK/RambuEnergy)

JAKARTA (RambuEnergy.com) – The Indonesian government admits that there are still pending issues that need to be resolved by the government and Inpex Corporation, one of which is about the capacity of the LNG plant.

Deputy Minister for Energy and Mineral Resources Arcandra Tahar said Inpex prefers the LNG plant capacity to be at 9.5 million tons per annum (MTPA) of LNG, plus 150 MMSCFD to be allocated for petrochemical industry. Inpex wants the 9.5 MTPA of LNG is dedicated for exports.

The government, said Arcandara, wants the capacity of the LNG plant to be at 7.5 MTPA in the form of LNG and 474 MMSCFD will be allocated for petrochemical industry that will be built nearby the LNG plant.

Arcandra said the government wants certain portion of the Masela block gas to be allocated for petrochemical industry. The government plans to develop petrochemical plant that will produce polyethylene and polypropelene.

“We need petrochemical industry to produce polyethylene and polypropelene. At present, we only have one petrochemical plant, while Thailand has seven. Therefore we propose 7.5 MTPA and 474 MMSCFD (for petrochemical needs,” Arcandra said.

Arcandra said this issue will be needed before entering the pre-FEED (Front End Engineering Design), which encompass the location, capacity and petrochemical plants.

Early this week, the Masela block issue was also discussed by the Indonesian President Joko Widodo and Japanese PM Shinzo Abe.

Coordinating Minister for Maritime Affairs Luhut Binsa Panjaitan has said that Inpex has in principle agree on granting seven year extension to Inpex to compensate ‘lost years’ after the government decided to build onshore LNG plants, instead of offshore (FSRU).

He also said the investment to develop LNG in onshore could be in a range of USD15 to USD16 billion, higher than earlier projection of USD14 billion.

Luhut said Inpex has expressed its agreement unofficially to the Indonesian government.

On March 23, 2016, President Joko Widodo said he has decided production facilities of Masela LNG project to be built onshore, instead of offshore as proposed by Inpex Corp, the operator of the block. As a result, Inpex must review and resubmit the PoD for Masela Block. Initially, the operator decided to develop floating storage regasification unit (FSRU).

Given this situation, Inpex has sent a letter to the Indonesian government, requesting the government to give 10 years of contract moratorium for 10 years between 2006 until 2016. The request is to compensate considered ten years of loss following the government’s decision to change the project scheme.

As a result of the government’s decision, the existing contract will expire in 2035.

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