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Cablegate: Inpex Likely to Opt for Offshore Lng Terminal In

VZCZCXRO1085
RR RUEHFK RUEHKSO RUEHNH
DE RUEHKO #2948 2960803
ZNR UUUUU ZZH
R 220803Z OCT 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 8148
INFO RUEHJA/AMEMBASSY JAKARTA 4392
RUEHFK/AMCONSUL FUKUOKA 0514
RUEHNH/AMCONSUL NAHA 2870
RUEHOK/AMCONSUL OSAKA KOBE 4288
RUEHKSO/AMCONSUL SAPPORO 1087
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC

UNCLAS TOKYO 002948

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EPET ENRG PREL ID JA
SUBJECT: INPEX LIKELY TO OPT FOR OFFSHORE LNG TERMINAL IN
INDONESIA'S MASELA BLOCK

1. (SBU) INPEX Corporate Strategy and Planning Division
Manager Hiroshi Ikeda confirmed the firm expects to make a
decision in mid-November to construct an LNG terminal to
service the Abadi gas field in the Masela Block. Ikeda
clarified an October 5 Nikkei report, one that suggests the
firm has decided to go ahead with construction, by saying the
offshore terminal is "likely", but not yet 100% certain.
Ikeda said the Nikkei interview with INPEX company President
Naoki Kuroda was intended to focus on the firm's integration
with Teikoku Oil Co., not on the LNG terminal construction.

2. (SBU) Ikeda said INPEX has had a 100% working interest in
the Masela Block since 1998 and drilled four appraisal wells
in 2007. The firm's current production forecasts for the
Abadi gas field are for between three and five million
tons/year by 2015. (Note: This one field would meet about 7%
of Japan's current LNG import demand).

3. (SBU) Ikeda explained the feasibility of the offshore
floating platform is still under review. Surveys strongly
suggest the anticipated Abadi gas field's LNG production
would far exceed the capacity of any offshore terminal
currently in operation. Thus construction of a new and larger
offshore terminal is necessary. The firm is negotiating the
terms of the next stage of a 20-year production sharing
contract with Indonesian authorities, and the GOI has
reportedly requested INPEX construct the new offshore
platform within Indonesian territorial waters as a
prerequisite to concluding the contract.

4. (SBU) Media reports estimate construction costs at one
trillion yen (roughly $10 billion), approximately 50% more
expensive than INPEX's second option of transporting the LNG
via a 400 kilometer undersea pipeline to an onshore facility
in Australia. Ikeda described the Australian option as
perhaps less expensive and technically easier, but added it
would have unspecified transaction and tax costs associated
with transporting the gas across international borders.
SCHIEFFER

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