Indonesia, Inpex hold talks on LNG terminal construction

Indonesia is in talks with Inpex Holdings aimed at having the firm construct the world's first offshore LNG terminal as part of its development of the Masela offshore gas field in the Timor Sea.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 4 -- Indonesia is conducting talks with Inpex Holdings Inc. aimed at having the Japanese firm construct the world's first offshore LNG terminal as part of its development of the Masela offshore gas field in the Timor Sea near the maritime border with Australia.

Indonesian officials, who are making construction of the terminal a condition for the development project, said development could begin as early as November, assuming that a final agreement is reached.

Discussion are said to be complicated by the fact that Indonesia, Japan's main supplier of LNG, is taking a hard line.

Inpex, which holds a 100% stake in the block, had hoped to lay a pipeline from the field to the northern coast of Australia and then use an LNG terminal there to export the gas.

However, Indonesia's Ministry of Energy and Mineral Resources instead proposed construction of the offshore terminal due to what it claims are the difficulties involved in laying pipe through a deep trench.

The proposed offshore LNG terminal would produce some 4-5 million tonnes a year and would begin operations in 2015 or later, according to the ministry. It added that the cost of building the proposed offshore terminal would reach $14 billion—about twice as much as a landside terminal in Australia.

The Japanese firm, which believes construction of an offshore terminal would be both difficult and costly, said negotiations are underway and that that nothing final has been decided.

Contact Eric Watkins at hippalus@yahoo.com.

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