Bahlil on Andaman Block Gas Processing: We Seek a Win-Win Solution
Minister of Energy and Mineral Resources Bahlil Lahadalia has confirmed that the government has not yet decided on a processing scheme for gas from the Andaman Block, as it is still considering the economic costs and benefits first. Previously, the Aceh Regional Government, through the Arun Lhokseumawe Special Economic Zone (KEK), has been pushing for the gas to be processed onshore.
“I cannot yet decide because it is still under discussion. What we must find is a win-win solution (regarding Aceh’s request). We cannot simply say yes if the cost is too high,” said Bahlil Lahadalia in Banda Aceh on Saturday, quoted by Antara.
He made the remarks to the media at a press conference following the inauguration of the Aceh chapter of the Golkar Party’s regional management board in Banda Aceh.
Bahlil stressed that the gas management is ultimately a business matter. In other words, if the economic calculations are deemed sufficient, Aceh’s request for the gas to be processed at KEK Arun could be considered.
Conversely, Bahlil said, if the economic calculations prove too burdensome, onshore gas processing may be difficult to force through.
“Because no business can end up at a loss. Everyone must profit. Profit for the people of Aceh in terms of revenue, and profit for the investor. And we can share that revenue,” said Bahlil.
As previously reported, Mubadala Energy has discovered gas reserves offshore in the Andaman Block. In this initial phase, Mubadala Energy’s production is targeted to reach 300 MMSCFD (million standard cubic feet per day).
In connection with the discovery, Aceh Governor Muzakir Manaf, known as Mualem, has written to President Prabowo Subianto and the Minister of Energy and Mineral Resources regarding the management of the oil and gas discovery at the Tangkulo South Andaman field by Mubadala Energy.
The Aceh regional government is requesting that the gas be managed through an onshore receiving facility (ORF) on land, namely at the Arun Lhokseumawe Special Economic Zone. This means processing would not be carried out via an FPSO (floating production, storage and offloading) scheme, or offshore processing.
The Aceh regional government has also asked for Mubadala’s gas to be allocated for industry in Aceh. In addition, it has requested a temporary postponement of the Plan of Development (PoD), the project’s planning document.
Bahlil explained that the gas discovered by Mubadala is located beyond 12 nautical miles offshore. If a gas pipeline were built, the cost would be considerable. As a result, the gas price could soar to US$10 per MMBTU and become uncompetitive.
“If we build the pipeline, the cost is indeed high. And that would not produce a competitive gas selling price. It could reach above US$10 per MMBTU,” he said. Mubadala’s initial-phase gas production is planned at around 300 MMSCFD (million standard cubic feet per day).
He said part of the planned production would be distributed to PLN and to industry in Aceh, namely Pupuk Iskandar Muda (PIM). “Because Pupuk Iskandar Muda currently uses LNG for part of its feedstock, which we take from Papua, Sulawesi and Kalimantan. This is the portion we will push to be supplied from the Andaman Block,” he said.
Furthermore, Bahlil stated that the concession holder of the Andaman Block is Mubadala Energy. Therefore, the government must ensure its sustainability and its impact on the welfare of the Acehnese people. “That is the most important thing. And there is revenue sharing involved as well.”