Indonesia decides against Inpex floating LNG project, wants to stay onshore

[JAKARTA] Indonesia has decided against a proposal by Japanese oil and gas company Inpex Corp and Royal Dutch Shell to build a US$15 billion floating liquefied natural gas project in the country's east, the president said on Wednesday.

The resource-rich Southeast Asian nation will instead pursue plans to process the gas from the Masela field onshore, President Joko Widodo said in a recorded statement obtained from palace officials.

The decision will be a blow to Inpex and Shell, as well as to Indonesia's energy regulator (SKKMigas), which warned last week that a decision to build the Masela project onshore would lead to delays and job cuts.

Shell and Inpex declined to immediately comment on the matter as they said they had not received official notification on the decision. It is unclear whether the companies would be involved in the touted onshore project.

Jokowi said an onshore LNG plant would be more economically beneficial for Southeast Asia's largest economy than the 7.5 million-tonne-per-year floating LNG project, which would have been the world's largest such facility.

"This is a long-term project that concerns hundreds of trillions of rupiah. From these calculations, we have decided to build it onshore," President Joko Widodo said in the recorded statement.

"Our considerations are first we want the regional economy as well as the national economy to benefit from the development of the Masela block. Second, we want the benefit to be felt regionally."

SKKMigas has warned that shifting to an onshore project would increase costs and could push the completion date back by three years from around 2026.

"I will ask SKKMigas to discuss the project in detail (with investors) so that the postponement won't be too long," said Energy Minister Sudirman Said, who had initially advocated the plant being built offshore.

"There might be a slight delay (to the project) due to this assessment," he said on Wednesday.

The decision came as Woodside Petroleum and its partners shelved plans to build the US$30 billion Browse floating LNG project off Australia in the face of global oversupply.

REUTERS