"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 decide to build (the project) onshore," Jokowi said.
Pontianak, W Kalimantan (ANTARA News) - President Joko Widodo (Jokowi) finally decided on Wednesday that the Masela liquefied natural gas (LNG) plant would be built onshore.

Jokowi told reporters here after a visit to the border city of Entikong in West Kalimantan, 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 decide to build (the project) onshore," he said.

One of the most important factors is that the project would serve as a driver of economic growth in the area around Masela, in southern Maluku, he said.

"The Energy and Mineral Resources Ministry and the Upstream Oil and Gas Regulator (SKK) Migas) would follow up the decision," he said.

Sudirman Said, the Energy and Mineral Resources Minister said he was pleased to hear the decision.

"I would immediately tell the investors to restudy the whole plan," the minister said.

Review of the plan is needed as the investors Inpex Corp. and Shell have proposed to build floating LNG plant to process gas from the Masela block.

He said as a consequence implementation of the project would likely be delayed as the investors would need time to restudy the whole aspects of the multi billion dollar project.

"I would ask SKK Migas that the delay would not be too long," he said.

He said in principle the government wants that the local people would benefit from the development of the giant gas block.

The presidential decision is expected to end the controversy over whether the facility is to be built on shore or offshore.

The investors backed up by Sudirman wanted the project to be built onshore saying the cost was much cheaper.

Based on the feasibility study by Inpex, building the LNG plant offshore, would cost only about $14.8 billion, as against $22.3 billion if it is to be built onshore.

Additional cost would be needed for around 60 kilometers of gas pipes under the sea if the plant is to be built on the nearest islands such as Aru.

Apart from additional cost, the pipes would be vulnerable to destruction by earthquakes that frequently hit that area.

Independent consultants, citing risk of earthquake, have also recommended development of the LNG plant offshore as proposed by the operators/investors.

The Upstrem Oil and Gas Regulator (SKK Migas) also already approved the proposal.

However, Coordinating Minister for Maritime Rizal Ramli strongly recommended to build the facility onshore.

Rizal spoke of the possibility of integration of the plant with petrochemical industry if the plant could be built on shore on the Aru island.

Jokowi also had been under pressure to make an immediate decision.

A lawmaker urged the government to immediately decide on the development scheme for a liquefied natural gas (LNG) plant in the giant Masela gas block, Maluku.

Deputy chairman of the Commission VII of the Parliament Fadel Muhammad the president should not delay making the decision whether the facility is to be built on shore or offshore.

"Indonesia has done almost everything to lure in more investment to the country, but now we might have turned down a huge investment," Fadel said.

Earlier, head of SKK Migas Amien Sunaryadi said Inpex would postpone development of the LNG plant by at least two years on the governments indecision on the companys proposal to build the facility offshore.

Amien said that Inpex hoped the revised development plan could be approved soon.

However, even if a decision was made now on proposed floating LNG, the final investment decision can only be made at the end of 2020, he said.

Amien said Inpex Indonesia had said it would downsize up to 40 percent its personnel in Indonesia on uncertainty of governments decision.

Inpex as the operator and Shell respectively hold 65 percent and 35 percent stakes in the Masela block.

Inpex has submitted a plan to build a floating LNG plant with a production capacity of 7.5 million metric tons per year.(*)

Editor: Heru Purwanto
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