Govt prepares two scenarios for Masela
Thursday, May 12 2016 - 09:47 AM WIB
The government is preparing two scenarios for the utilization of gas from the Abadi field of Masela block in Maluku province for the production of LNG, CNG and petrochemicals, Coordinating Minister of Maritime Affairs Rizal Ramli said.
The two scenarios are being made based on two assumptions for oil and gas prices and production life of the block.
Rizal said the first scenario will be based on the assumption that the block as a production life of 71 years with 541 mmscfd of the block?s gas production used to produce LNG, 300 mmscfd for petrochemical industry, 60 mmscfd for CNG production. Based on the assumption of oil price at US$60 per barrel and gas price at $6 per mmbtu, the block?s Internal Rate of Return (IRR) may reach 16.45 percent.
The second scenario will be based on a shorter production life of 47 years. The production life is shorter because the volume of gas used for petrochemical production is increased to 700 mmscfd while gas allocation for LNG and CNG production is similar to the one stated in the first scenario. With gas price assumption being similar to the one in the first scenario, the block?s IRR over the production period of 47 years will be higher than the level stated in the first scenario ?that is 21.42 percent.
?The investment is still profitable for investors,? he said.
Rizal noted the profit will be bigger if the gas is used for other purposes aside from LNG production, rather than using it for LNG production only. If the gas production stands at 1,200 mmscdf or 7.5 mtpa of LNG, it will generate $2.52 billion in revenue per year assuming the price at $7.2 per mmBtu. In comparison, a similar volume of gas can generate $6.5 billion per year if the gas is used for petrochemical production.
Rizal hoped that the gas will be delivered to industries in Maluku. He cited the ministry of industry? data which say gas demand in Maluku reaches 206.5 mmscfd, consisting of 165 mmscfd coming from petrochemical industry, 23 mmscfd from ceramic industry, 16 mmscfd from glass industry and 2.5 mmscfd from seaweed industry.
Meanwhile, Director for the Management of Oil and Gas Upstream Business at the ministry of energy and mineral resources, Djoko Siswanto, said the making of scenarios for the utilization of Abadi gas has not been complete yet. The problem is that the government has yet to decide on the allocation of gas from the block as it is still seeking to ensure that the domestic industry will be capable of absorbing the gas.
If the gas can?t be absorbed by the domestic market by the time the Masela block has come into production, it will cause losses on the government and the return on the investment will be hard to achieve.
In order to ensure that the Abadi gas can maximally utilized domestically, the government will create an inter-departmental committee to map out the potential offtakers of the gas. The committee will comprise of the ministry of industry, the National Development Planning Board (Bappenas), the ministry of environment and forestry, the ministry of agrarian affairs, the ministry of transportation, the ministry of manpower and transmigration , the ministry of research and technology, universities, the rector of Maluku province and Maluku informal leaders.
?The team will find out which industries need the gas,? Djoko said.
Editing by Johannes Simbolon