Royal-Dutch Shell and Japan-based Inpex Corporation will invest upwards of $20 billion to develop the gas-rich Masela block in the Arafura Sea south of Papua, a top government official says.
The investment would be disbursed gradually, with the first phase, expected to begin in 2013, to require $15 billion in capital spending, Coordinating Economic minister Hatta Rajasa said on Thursday.
Shell holds a 30 percent stake in the Masela block, while 10 percent is controlled by PT EMP Energi Indonesia, and Inpex, the block operator, holds majority ownership with 60 percent.
“Shell has also been committed to expanding the capacity of the planned floating LNG [liquefied natural gas] plant at Masela block from 2.5 million tonnes to 6 million tonnes,” Hatta told reporters after meeting Shell chief executive officer Peter Voser with President Susilo Bambang Yudhoyono at the Presidential Palace in Jakarta on Thursday.
Hatta said that Yudhoyono asked Shell and Inpex to allocate most of the gas from the block for domestic use, so the fuel would aid Indonesian economic growth and not simply provide revenue.
According to upstream oil and gas authority BPMigas estimates, the Masela block has a total gas reserve of 6.05 trillion cubic feet. The block’s development is expected to be completed between 2018 and 2019.
BPMigas said the investment needed to exploit current reserves was between $9 billion and $10 billion, although the figure would be much higher if Shell and Inpex proceeded with further exploration.
Energy and Mineral Resources minister Jero Wacik, who also attended the meeting, said that Shell asked the government to accelerate its approval of the block’s plan of development (POD).
“According to the schedule, they can produce the first gas by 2019 at the latest, but I have asked them to move forward the schedule to 2017. We’ll talk in detail further about which projects can be accelerated so that the first production can be earlier than scheduled,” he said.
Jero said he had ordered BPMigas to help the companies with anything needed to execute their development projects on schedule.
Separately, an energy expert from the ReforMiner Institute, Komaidi Notonegoro, said the gas contribution from the Masela block would boost industrial growth, since only 18 to 25 percent of local industry’s gas needs could be fulfilled by the government.
“If we fix the way we manage gas production and dedicate Masela block production for domestic users, the impact will be significant on the growth of industry. With the current gas shortage, the capacity of our industry has been very limited,” Komaidi told The Jakarta Post.
In the downstream sector, Jero said that Shell wants to build gas stations in mining, industrial and plantation areas after the government recently implemented a ban on subsidised fuel use for vehicles used at those sites.
Currently, Shell operates 60 gas stations in Greater Jakarta and Surabaya, East Java, after entering the local fuel sales business in 2006.
Voser said Shell regarded Indonesia as “a key growth country” for Asia and “important for Shell’s long-term global strategy.”
“We look forward to partnering with Indonesia to deliver benefits to the nation and developing energy to meet the country’s and the world’s growing needs,” he said.
In addition to gas stations, Shell, in cooperation with local companies, has built fuel storage facilities in Gresik and Pulau Laut; a lube warehouse facilities in Bekasi, West Java; Surabaya, East Java; and Balikpapan, East Kalimanatan; and a bitumen storage facility in Cirebon, West Java.