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Wanted: Certainty on the Masela Block  

Translator

Editor

4 May 2016 10:02 WIB

Masela Block. Image: http://maritim.go.id/

TEMPO.CO, Jakarta-More than a month has passed since President Joko Widodo announced his decision on the Masela Block, but nothing more has been heard about it. The two operators awarded the right to manage the block, Inpex Masela Ltd. and Shell Plc., have shown no signs of carrying out another feasibility study, following the President's decision. If this state of affairs continues, both the operators as well as the state will lose out.

The Masela Block issue emerged once again when the President visited the Netherlands last week. In a meeting with Dutch Prime Minister Mark Rutte and several businessmen, the decision to opt for an onshore refinery was raised. It was still seen as a controversial choice.

The option to build an onshore refinery as a gas terminal for the Masela Block in Maluku's Arafura Sea was announced by the president at a press conference in Pontianak on March 23. This decision also ended the 'open war' between Coordinating Minister for Maritime Affairs Rizal Ramli and Energy and Mineral Resources Minister Sudirman Said. They had publicly and loudly differed over where the refinery should be built.

Originally, the refinery was to be built offshore. The Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) had reached an agreement with Inpex and Shell to develop the project. The feasibility study had been completed but the 2015 agreement was 'disrupted' by Minister Rizal, who was convinced that the onshore refinery would be more profitable.

Rizal's opinion was based on calculations carried out by the Seven Three Forum (Fortuga), an association of alumni engineers from the Bandung Institute of Technology class of '73. According to Fortuga, an onshore refinery would only cost US$16 billion, compared with US$22 billion for the offshore option. This differed from the Inpex calculations, which concluded that the offshore cost would be US$14.8 billion, cheaper than the US$19.3 billion cost of building onshore. The independent British consultants appointed by the Energy ministry, Poten & Partners, also calculated that the offshore option would be more profitable.

The President eventually went for the onshore option after taking into account the fact that building an onshore refinery would stimulate regional development. This makes sense, but it means that an onshore refinery would bring no benefits to the regional economy even if the Maluku government would still get its Rp5 trillion per year, which it could use to improve the welfare of its people.

After the President announced his choice, SKK Migas asked Inpex and Shell to revise their feasibility study. This has not been done. The operators said this was because the SKK Migas request had no legal basis, as it is only based on a presidential statement. 

We know that such a revision is no simple matter, would need up to three years to carry out, and cost quite a bit of money. Inpex and Shell are not wrong to take this stance given their bitter experience of their offshore refinery plan being 'shifted' to onshore before any guarantee from SKK Migas that the refinery would be built offshore.

The President must step in and resolve this matter. He must respond to Inpex' concerns by providing legal certainty, for example by issuing a presidential decision that clarifies his preferred option. With this certainty, we hope the Masela project will start soon, unless the president later changes his mind and decides the offshore option is better. There would be no shame in doing this. (*)

Read the full story in this week's edition of Tempo English Mgagazine



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