"As for the island on which the contractors will build the onshore gas refinery plant, we hope they will take that decision themselves. They can make their own calculations and choose the best island for their plant," Head of the Upstream Oil and Gas Operator, SKK Migas Amien Sunaryadi, said on Thursday.
There are several islands on which the onshore refinery plant for Masela Block`s Abadi gas field can be built. These include the islands of Selaru, Barbar, Aru and Tanimbar.
He said while deciding the onshore location, the contractors (Japan`s Inpex Corporation and Shell Upstream Overseas Services Ltd, a Royal Dutch Shell subsidiary) will make their own calculations. For this, Inpex will revise its previous plan of development (PoD) since now it is going to be an onshore gas development project.
Amien said Inpex would consider several aspects while zeroing in on an island for the refinery. These will include land availability and depth of the sea for development of a port. After all, although this project is to be developed onshore, it will need a relatively large floating production storage and offloading (FPSO) vessel.
"If the floating production storage and offloading ship is relatively large, it will also deploy a large number of workers who will need adequate food supplies. So, it will also need a logistics base on land to supply food to them through the FPSO," he said.
After Inpex revises its calculations about the project`s cost and schedule, the SKK Migas will carry out follow-up examinations and if everything is agreed upon, the regulator will make a recommendation to the Ministry of Energy and Mineral Resources.
The SKK Migas head said Inpex should not take too long to revise the PoD, otherwise its economic value will go down. "They (Inpex) know it that the more delayed the submission of the revision, the lower the economic viability of the project," he said.
Inpex has to revise its PoD since its previous PoD was based on offshore refinery development scheme. The issue regarding the location of the refinery plant had earlier triggered a debate on whether it should be built onshore or offshore.
Based on the feasibility study conducted by Inpex, it will cost only some US$14.8 billion to build the gas refinery plant offshore as against US$22.3 billion for an onshore refinery on the Aru Island or US$19.3 billion if built on Tanimbar Island.
Coordinating Minister for Maritime Affairs Rizal Ramli had stated that according to his study, the cost of developing an onshore refinery would be around US$16 billion, while it would take US$22 billion to develop the refinery offshore.
President Joko Widodo (Jokowi) finally decided on Wednesday that the Masela liquefied natural gas (LNG) plant would be built onshore, thus ending the debate.
The decision to build the plant onshore was lauded by many circles, including the Indonesian Young Entrepreneurs Association (Hipmi).
"Hipmi appreciated the decision because it ended the long drawn debate about the Masela Block which had been going on for about 15 years," said Bahlil Lahadalia, the chairman of Hipmi.
However, he called on local businesses to take advantage of the development of the Masela Block`s refinery plant onshore. Local businesses should really reap optimum benefits.
"The decision to develop the refinery onshore should benefit local firms. They can serve as suppliers, subcontractors, service providers or look after other aspects," remarked Bahlil Lahadalia.
Following the decision, Energy and Mineral Resources Minister Sudirman Said ordered the Upstream Oil and Gas Regulator SKK Migas to communicate the government`s decision to the investor, so that the contractor would review their plans that it had submitted earlier.
The minister had also ordered SKK Migas to communicate the problems with the district and provincial governments of Maluku.
SKK Migas should also cooperate with the investors, so that the plans could be reviewed immediately, and a final investment decision would be made in a not-too-distant time.
Head of SKK Migas Amien Sunaryadi stated at a press conference on Thursday that his side had met the two contractors: Inpex Corporation and Shell Upstream Overseas Service Ltd
According to SKK migas, the government`s decision on building an onshore refinery of the Abadi gas field in the Masela demonstrated its firm stance.
"I do not think it is disturbing. This is a firm stance of the government," the SKK Migas head of Public Relations Elan Biantoro stated meanwhile.
The government has finally decided that the refinery plant of Masela Block`s Abadi gas field should be located onshore. Its decision came as a surprise for the Masela contractors. It took the decision after the project triggered polemics on whether it should be developed onshore or offshore.
President Jokowi told reporters on Wednesday after a visit to the border city of Entikong in West Kalimantan that he had decided to build the Masela LNG plant onshore. He added that his decision was based on a number of factors.
"This is a long term project, not only 10 years, 15 years, but much longer, involving hundreds of trillions of rupiahs. Therefore, based on the various factors, we decided to build (the project) onshore," he stated.
According to Coordinating Minister for Maritime Affairs Rizal Ramli the Masela Block keeps 10.7 trillion cubic feet of gas reserves and could be tapped for 70 years.