SKK Migas is analysing the right technology for the Masela Block.
SKK Migas

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) has said the investment value for developing the Masela Block could be lower, as claimed by former Energy and Mineral Resources (EMR) Minister Arcandra Tahar, due to plunging oil prices and technology.

SKK Migas Deputy of Operations Control Muliawan said his agency, along with the EMR Ministry and Masela Block Inpex Corporation, will start to re-calculate the investment value of the gas-rich block located on the Arafura sea in Maluku. “We are breaking it down. We are reviewing the costs again. Hopefully, we will be able to lower the cost,” he said in Jakarta on Monday (22/8).

(Read: Investment in Masela Block Could be Slashed to US$ 15 Billion)

Muliawan explained there are two main factors that could lower the investment value of the Masela Block. First, the recent fall in crude oil prices, which have caused exploration and oil and gas production activities to decline.

The cost of supporting oil and gas businesses has also declined. “We see that there is an oversupply of supporting services. They could offer relatively low prices,” he said.

Second, Muliawan continued, technology could lower costs as well. SKK Migas is analysing the right technology for the Masela Block.

There are several options that could be used to develop the block, one of which is the design that was used to develop the onshore refinery. “For example, the technology used by BP. That could accelerate (development),” he said.

Previously, acting EMR Minister Luhut Binsar Panjaitan said the investment value for the Masela Block could be lowered to US$ 15 billion, based on a report made by Arcandra when he was still minister.

Luhut said Arcandra came up with this figure when he met with Inpex. During the meeting on 5 August, Arcandra asked Inpex to show him the cost structure for the Masela Block. (Read: Minister Luhut Claims Inpex Agrees to Lower Masela Block Investment)

After viewing and studying this structure, Arcandra corrected a few points and submitted his new investment calculation, of US$15 billion. “The figures were returned, the changes were not from Mr. Candra. Mr. Candra asked, ‘what about your cost structure’? Well, then Inpex showed him. Mr. Candra corrected it, they agreed. That’s how they came up with US$15 billion,” Luhut said last Thursday (18/8).

Katadata records show Inpex proposed an investment value of US$14.8 billion for the development of the Masela Block using a floating liquefied natural gas (FLNG) facility while an onshore scheme with a connection to Aru’s pipeline network would require an investment of up to $22.3 billion.

The President’s Staff (KSP) had a different calculation, however. The investment value for a FLNG scheme was $18.2 billion while an onshore scheme would be some $13.25 billion. (Read:  Masela Block Debacle, Faisal Basri: Who Owns the Pipeline Company?)

Meanwhile, the Masela Block’s operator, Inpex Corporation, was unwilling to explain its calculation. Inpex Corporation spokesman Usman Slamet said the company was in the middle of intensive discussions about the block’s plan of development so the project can start immediately. “All parties are trying to optimise the economic value of the project,” he told Katadata on 18 August.