Fait accompli in Masela
THE offer by a business group owned by Tomy Winata of its harbor in Tual, Maluku as a temporary logistics port for the construction of the Masela Block project must be viewed carefully from the start
AS WELL as it is not being included in the initial plan for the project to construct a liquid natural gas (LNG) refinery complex to be built in Saumlaki, Yamdena Island, the inclusion of Tommy Winata’s facility will clearly cause a significant rise in the cost of the project, which has already reached Rp280 trillion.
At first glance, the port and logistical support provided by Samudera Indo Sejahtera, the name Tommy Winata’s subsidiary in Tual, appears satisfactory. Although located 500 kilometers northeast of the Abadi Masela Block gas field, the port has a depth of 15 meters, enough for mooring large ships. The other two ports discussed as possible alternatives are closer. One of them is the port of Pertamina at Saumlaki, but it is only half as deep as the fish port owned by Tomy in Tual.
The problem is that Inpex and Shell, the contractors for the Masela project, have never announced a plan to construct such a support facility. The revised documents of the plan of development of the Abadi field were only approved by the ministry of energy and mineral resource last July. At the momen, Inpex is preparing the front-end engineering design documentation, before construction begins at the end of 2020. Therefore, the offer from the AG group network Artha Graha Group Network seems to have been presented as a fait accompli.
This way of doing business cannot be allowed to go ahead. The Masela Block project is a strategic plan that could boost state revenues from the oil and gas sector for the next 50 years. The plan is that the Masela project will produce 9.5 million tons per year of LNG and natural gas, or 150 million cubic feet of pipe gas per day. The abundant gas reserves in the Masela field, up to 10.7 trillion cubic feet, led to the Inpex investment setting a record as the largest ever capital investment by a Japanese company in Indonesia. The delays in construction could lead to opportunity losses of Rp49 trillion per year.
The story of the Masela Block project is rather complicated. The government decision to change the development scheme of the project, from the offshore refinery that was agreed in 2010 to an onshore refinery six years later led to an increase in costs that should have been avoidable. In order to cover the costs of this change, the production contract for the Masela Block has now been extended to 2055. In other words, the government is also having to absorb losses as a result of this decision.
As the person in the government bearing the greatest responsibility for investments, Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan must intervene to ensure that every decision in the development of the Masela Block project is taken based on rational business considerations. Lobbying behind the scenes will only damage the interests of investors and the government itself. In the long term, this kind of practice will result in a business climate that is not competitive.
Chairman of the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) Dwi Soetjipto along with Energy and Mineral Resources Minister Arifin Tasrif must also protect this project from the intervention of other parties who do not have an interest in it. Dwi dan Arifin must not waver in the face of pressure from left and right. They must ensure that the state obtains the greatest possible benefit from this prestigious project, and reject offers from others who in essence only want to get their hands on some of the proceeds from Masela.
At the same time, as contractor, Inpex must be transparent. The Japanese company must give no tolerance to unsuitable business practices, and must control the costs of the project so that they do not baloon and damage the interests of Indonesia.
In the end, President Joko Widodo must ensure that the implementation of the Masela project is not disrupted by proposals put forward on behalf of third parties. On a number of occasions, Jokowi has underlined his priority to spur economic growth and the construction of infrastructure in his second administration. Allowing these third-party proposals is at odds with this commitment.