Minister considers Aceh request for onshore Andaman gas processing

Banda Aceh (ANTARA) - Indonesia is evaluating Aceh's proposal to process natural gas from the offshore Andaman Block at the Arun Special Economic Zone, with authorities weighing project economics against regional development goals, Energy Minister Bahlil Lahadalia said.

Speaking in Banda Aceh on Saturday, Bahlil said discussions were continuing to find a solution that benefits both the government and investors.

"I cannot make a final decision because discussions are still underway. We have to find a win-win solution," he said.

The government cannot approve a plan if development costs make the project commercially unviable, Bahlil said.

He said large-scale gas projects must meet sound commercial and economic standards.

If the economics are favorable, the government could consider Aceh's proposal to use the Arun Special Economic Zone. Otherwise, requiring onshore processing would be difficult.

"No business can operate at a loss. Aceh must benefit through regional revenue, and investors must also earn returns," Bahlil said.

The debate follows Mubadala Energy's major deepwater gas discovery at the South Andaman field.

The company is targeting initial production of about 300 million standard cubic feet of gas per day.

Aceh Governor Muzakir Manaf has asked President Prabowo Subianto and the Energy Ministry to delay approval of the field's Plan of Development.

The province wants gas processed through an Onshore Receiving Facility at the Arun Special Economic Zone instead of a floating offshore production system.

Aceh is also seeking a dedicated gas allocation to support industrial development.

Bahlil said the fields lie well beyond Indonesia's 12-nautical-mile territorial limit, making subsea pipelines costly.

"If we build the pipeline, capital expenditure will be extremely high. Gas prices could exceed US$10 per MMBtu," he said.

Bahlil said part of the planned 300 million standard cubic feet per day output would be prioritized for state utility PT PLN and regional industries, including fertilizer producer PT Pupuk Iskandar Muda.

Pupuk Iskandar Muda currently relies on liquefied natural gas shipped from Papua, Sulawesi and Kalimantan. Gas from the nearby Andaman Block would shorten its supply chain.

Bahlil said the government would work with Mubadala Energy to ensure the project's commercial viability while maximizing benefits for the people of Aceh.

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Translator: Rahmat Fajri, Yashinta Difa

Editor: Rahmad Nasution

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