• Company wants to build floating LNG terminal instead
  • OPEC member aims to develop local economy, president says

Indonesia wants Inpex Corp. to build the delayed $14 billion Masela gas project on a remote eastern island instead of offshore, to help local economic development.

The move, announced by President Joko Widodo on Wednesday, comes after the company said last week it would cut its workforce in Indonesia by as much as 40 percent due to government delays on deciding what to do with the project. Japan’s Inpex, which wants an offshore facility, declined to comment on the decision, Usman Slamet, a spokesman, said by phone message.

“Based on calculations and considerations, we decided it should be built onshore,” Widodo said. “We want both the local and the national economy to benefit from the Masela project.”

OPEC-member Indonesia is seeking to boost investment in the energy industry to make up for steadily declining production, yet is also looking to drive development in the fringes of its 17,000-island archipelago. Project approval delays and an exploration slowdown will result in a wider supply and demand gap for natural gas in Indonesia and increase its reliance on imports, according to consultancy Wood Mackenzie.

Inpex, which holds a 65 percent stake with partner Royal Dutch Shell Plc having the rest, aimed to build a floating terminal capable of processing 7.5 million tons a year of liquefied natural gas (LNG). The government wants the plant built instead on Saumlaki, an island of about 150,000 people more than 1,100 miles east of Bali and 310 miles north of Australia’s Darwin.

A final investment decision was due in 2018, assuming an offshore plant was approved. It may only come onstream in 2026, Edi Saputra, Wood Mackenzie’s senior analyst for gas and power, said earlier this month. The change will cause delays, the country’s energy minister said.

“We will give the operators a chance to review, therefore there will be a short delay,” said Energy and Mineral Resources Minister Sudirman Said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE