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Indonesia to Ask Mubadala to Speed Up South Andaman Gas Development

May 14, 2024

© nikkytok / Adobe Stock
© nikkytok / Adobe Stock

Indonesia will ask Mubadala Energy to accelerate gas development in Indonesia's South Andaman Block after the United Arab Emirates explorer made a second discovery there, Dwi Soetjipto, chairman of upstream regulator SKK Migas, said on Tuesday.

The government hopes gas production could start in 2028, Dwi told reporters on the sidelines of the Indonesia Petroleum Association conference.

Indonesia's oil and gas production has declined sharply in the past several years due to a lack of investment. Jakarta is keen to reverse the trend, targeting output of one million barrels of oil and 12 billion standard cubic feet per day of gas by 2030.

Mubadala Energy announced on Monday its Tangkulo-1 exploration well had found gas in the South Andaman Block, located around 100 km (62 miles) off northern Sumatra, where it said there was potential of more than 2 trillion cubic feet (tcf) of gas-in-place.

The announcement came just months after a discovery at the Layaran-1 well with potential for more than 6 tcf of gas-in-place, which analysts said was the world's second-largest deep water discovery last year.

"We want to accelerate the plan of development (POD)," Dwi said.

"We will discuss with them and hope the POD can be established this year and be onstream as soon as possible with all those accelerations."

Asked about the government's timeline, Abdulla Bu Ali, president director of Mubadala's Indonesian unit, said the company was "fully aligned" with Jakarta's desire to accelerate the project, but that some processes would take time.

"We have to really do our job properly, we need to go through phases of development, so now we are in the stages of exploration and appraisal that take some time," he told reporters on the sideline of the conference.

Mubadala's latest discovery brings the total in-place resources in the North Sumatra deepwater area where the block is located to 11 tcf since Harbour Energy's initial Timpan discovery in 2022, consultancy Wood Mackenzie said.

"The latest Tangkulo discovery, following the giant Layaran discovery, has made Mubadala Energy the new ‘sweetheart’ in Indonesia's exploration sector," said Andrew Harwood, director of corporate and upstream research at Woodmac.

"However, the next major challenge for the company will be to manage stakeholder expectations by balancing Indonesia's national requirements with its own corporate objectives."

Indonesia is trying to balance meeting fast-growing domestic gas demand and boosting exports of liquefied natural gas (LNG) to buyers in the region.

Dwi said gas from the South Andaman Block could be channelled to the Arun LNG plant where the equipment can be upgraded.

"If the Tangkulo discovery and other nearby prospects are developed together, they could meet the domestic requirements, enabling Mubadala to explore export solutions for its Layaran find," Woodmac's Harwood said.

Starting gas production after 2030 may be a more realistic date given the complexities involved, according to Woodmac.


(Reuters - Reporting by Fransiska Nangoy and Bernadette Christina; Writing by Florence Tan; Editing by Sonali Paul and Mark Potter)


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