Indonesia, Japan to address issues on major projects

ASEAN+ December 20, 2016 01:00


INDONESIA seeks to settle issues surrounding flagship projects as well as the future of the gas-rich Masela block with Japan during an official visit to the East Asian country this week.

During the visit, Coordinating Maritime Affairs Minister Luhut Pandjaitan is scheduled to meet Japan’s top officials, including its foreign minister, transportation minister, defence minister and chief of staff to the prime minister.

Discussions will touch on problems hampering a mega seaport project in Patimban, West Java and the semi-high speed railway connecting Jakarta and Surabaya, whose financing will derive from Japan.

“We want to finalise these projects. We expect these things (issues with the projects) to be settled as Prime Minister Shinzo Abe will visit (Indonesia) in January next year,” Luhut said recently.

Luhut apparently pointed out pending administrative issues surrounding the Patimban project, such as the environmental impact analysis and detailed engineering design, which are still underway.

The future Patimban Port will be located about 70 kilometres from the Karawang Industrial Estate and Bekasi in West Java, where many Japanese industrial firms, particularly automobile manufacturers, operate.

Once finished by 2019, the container port can handle 1.5 million 20-foot equivalent units, which will be expanded to 7.5 million TEUs by 2027.

The port had been set to lie in Cilamaya, also in West Java, but the plan was scrapped as it would disrupt the operations of state-owned oil and gas firm Pertamina.

According to a government estimate, the Patimban project will cost US$3.08 billion (Bt110 billion).

Foreign loans 

The National Development Planning Agency said recently that $1.7 billion to finance the deep-sea project was expected from foreign loans, while the government would provide $595 million to build support facilities.

The semi-high speed railway is projected to require $2.6 billion in loans from Japan for the first phase.

The project is significant for Japan after it lost a bid against China for the construction of a high-speed railway connecting Jakarta and Bandung, West Java, earlier this year.

The Jakarta-Surabaya semi-high speed railway, whose feasibility study will be carried out jointly by Indonesia and Japan, seeks to revitalise existing infrastructure serving the two big cities, cutting travel time from 12 hours to three-and-a-half hours only.

Luhut said another key issue to be addressed during the visit was the ongoing negotiations for the Masela block in Maluku.

Japanese gas firm Inpex Corporation has requested incentives to run the onshore Masela block, including cost recovery for its off-shore development plan worth $1.2 billion and the extension of 10 years from 2028 when the contract is supposed to terminate.

The government had proposed only four years for the contract extension.

“We will offer several other (oil and gas) blocks to Japan,” he said, citing a block in East Natuna as an example.

In response to the planned discussion in Japan, Inpex senior communications and relations manager Usman Slamet expressed his appreciation for the government’s understanding of the necessary conditions to enable the Masela project to be commercially viable for investment.

“We are optimistic the government will make the best decision,” he said.