Newsletter No. 1012
News-Analysis
May 15, 2008

 

The following report was written by David Adam Stott (Shingetsu Member No. 17), who is based at The University of Kitakyushu.

INPEX STRUGGLES TO DEVELOP LARGE TIMOR SEA GAS FIELD

Three reports surfaced on May 14th regarding the results of gas exploration at the Masela block in the Timor Sea, in which Japanese firm Inpex holds a 100% share. For some while Inpex has been considering submitting a US$4.2 billion project proposal to Jakarta, originally with plans to ship 3-5 million tons per year of LNG to Japan and elsewhere by 2015. The firm has also been assessing what kind of processing plant to build after it had decided not to process the gas in Australia. The reports below suggest that it will construct Indonesia’s first floating LNG terminal. Jakarta has been exerting pressure on Inpex to submit a firm proposal or risk losing its rights to develop the field. Below are relevant passages from the media reports:

Reuters: Indonesia is pushing oil and gas companies to accelerate exploration and production, given flagging production from its own ageing fields, and in order to avoid expensive imports. "I will meet an Inpex official this week. I expect they will submit development plans for the Abadi gas field during that time," Achmad Luthfi, deputy chief of the energy watchdog, known as BPMIGAS, told Reuters via telephone text message… In January, Indonesia warned Inpex that it had to submit plans for the field in May, or risk losing its contract. However, based on its exploration rights, the Inpex contract runs until November this year. The watchdog official had previously said that Indonesia wanted Inpex to build a floating liquefied natural gas (LNG) plant near Masela. But the Japanese firm has said it aims to start commercial gas production at Abadi in around 2014-2016.

Jakarta Post: The Masela Timor Sea gas block in East Nusa Tenggara has potential reserves of 10 trillion cubic feet, the country's second's biggest after the Tangguh block in Papua, an official says. Upstream Oil and Gas Regulator (BPMIGAS) Chairman Priyono said Monday that based on a first drilling trial by block operator Inpex, Japan's largest oil company, data on available reserves showed a potential “almost as big as the Tangguh gas block”… BPMIGAS Planning Deputy Achmad Luthfi said, however, that Inpex had yet to submit its proposal on project development, estimated to cost US$7 billion. "Inpex's representative from Japan will come to town tomorrow, to present detailed findings," Luthfi said. The Masela project is expected to involve the construction of a floating liquefied natural gas (LNG) processing terminal with a total capacity expected to reach 4 million tons per annum. This will be the first floating LNG terminal in the country.

Bloomberg: "We may be able to increase the capacity of the proposed LNG plant," R. Priyono, chairman of the regulator BPMIGAS, said in Jakarta today. An increase in reserves may allow Inpex to produce more LNG and meet rising demand. Asian utilities led by Japan boosted LNG imports by 10 percent to 112.2 million tons last year to substitute expensive oil and because of colder weather and the closure of some nuclear power plants in Japan, Facts Global Energy said in a report in March. Inpex is in the process of appraising the reserves, said Kazuya Honda, a spokesman, without confirming the reserve estimate. The Japanese company is drilling the fourth appraisal well in Masela, he said.