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Awaiting for Indonesia government’s decision on Masela Block development option

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JAKARTA ( – Japan’s giant oil and gas company Inpex and its partner Shell are now waiting anxiously on the government’s decision on Masela Block plan of development (PoD).

The government has two options – whether approving the operator’s proposal to develop the block by utilizing floating LNG (FLNG) or developing onshore processing facilities as requested by a number of top government officials and quarters of the society. If the first option is chosen, the Abadi Field FLNG would be the first in Indonesia.

Few months ago,  the Special Task Force for Upstream Oil and Gas Business (SKK Migas) received final draft revision of the Plan of Development (PoD) of Abadi Field within Masela Block from Inpex Corporation from Inpex and Shell.

Inpex has requested to revise the PoD of the block as it aims to double the capacity of its floating LNG vessel (FLNG) from 2.5 million metric tons to 7.5 million metric tons. The decision was made following the discovery of additional gas reserves in the area.

Inpex plans to add one more train to three units with an estimated mammoth investment of US$14 billion. The size of the FLNG is almost four times the size of a soccer field.

To assist the government in making the best decision, the Energy and Mineral Resources Ministry (ESDM) has appointed Poten & Partners as independent consultant to study and review the operator’s plan of development proposal. In addition to appointing the independent consultant, the energy ministry has also set up an Counterpart team headed by Nanang Untung and Faisal Basri as deputy chairman to supervise the work of the consultant.

Poten & Partners, Inc., headquartered in New York, provides brokerage, consulting, and project development services related to trading and transportation of crude oil, petroleum products, natural gas and liquefied natural gas, liquefied petroleum gas, and other commodities. The company also provides project development services for shipping and energy projects. It also assists in the financing of energy and shipping ventures. It has offices in seven locations worldwide; Athens, Guangzhou, Houston, London, New York, Perth and Singapore.

Director General for Energy and Mineral Resources Ministry IGN Wiratmaja Puja expects the appointment of the consultant should help the government in making the best decision on what option is the best to develop the Abadi field within Maela Block. Poten & Partners is selected out of 12 consultants taking part in the selection process.

Based on the review of SKK Migas, developing onshore facilities is estimated to reach US$19.3 billion, while developing offshore facilities, in this case FLNG, would be around US414.8 billion.

Coordinating Minister for the Maritime and Resources Rizal Ramli earlier called on the Energy and Mineral Resources Ministry and the Special Task Force for Upstream Oil and Gas (SKK Migas) to push Inpex Corporation to develop onshore LNG plant, instead of developing floating LNG facility (FLNG) as currently being proposed by Inpex.

He argues that the development of onshore LNG pant will stimulate the development of Aru Island, just like Balikpapan town in East Kalimantan, which benefited from the development of Mahakam block and other oil and gas blocks in East Kalimantan. He also said the development of onshore facilities will cost less, at around US$14 billion, instead of US$19 billion to develop offshore facilities (FLNG).

“Balikpapan developed into a large town, thanks to Block Mahakam development by Total. If we build gas pipeline to Aru Island, principally, we are building a new city in the next ten years, as big as Balikpapan,” he said.

The Abadi Field in Masela Block was originally planned to start commercial operation in 2017, then it was delayed to 2018, 2019 and now Inpex said it will be delayed to 2024. This means that the project has been delayed for seven years.

Inpex currently holds working interest of 65 percent in the Masela Block, while Shell holds the remaining 35 percent.

Masela Block covers an area of 4,291.35 square kilometers in Arafura Sea, 800 km to the east of Kupang, East Nusa Tenggara  province and around 400 km to the north of Darwin, Australia with water depth of 300-1,000 meters. (*)

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