UPDATE 1-Indonesia Masela LNG project eyes 2016 production

(Adds details on stages leading up to construction, production phase)

JAKARTA, Sept 15 (Reuters) - Inpex Corp , Japan's top oil and gas developer, aims to start building Indonesia's first floating LNG receiving terminal in the Masela block after completing a front-end engineering phase in the next year and targets production in 2016, energy regulator BPMigas said on Thursday.

Initial investment for the project is estimated at up to $5 billion and total investment for development under the first phase is projected at $13 billion, said Gde Pradyana, spokesman for Indonesia's BPMigas.

Bidding for the Masela Block (Abadi) project's front-end engineering design (FEED) will start in 2012, he said, following a meeting between Inpex Chief Executive Officer Toshiaki Kitamura and Indonesian Vice President Boediono on Wednesday.

"It is hoped that the FEED process can be started in 2012, followed by details on design and construction work until production is expected to start in 2016," Pradyana said.

Inpex Corp was awarded the contract to operate the Masela LNG block in Maluku, East Indonesia last December. The project was set to start this year but was delayed pending a decision on the type of terminal to be built.

The latest target for a 2016 start is two years ahead of Inpex's announcement last December, when it said that liquefied natural gas (LNG) production from the Abadi field in the Masela block will only start in 2018.

When contacted in Tokyo, Inpex spokesman Keisuke Yano confirmed the meeting between CEO Kitamura and the Indonesian vice president.

But he said that Inpex had delayed the start of front-end engineering and design to first-half 2012 from second-half 2011.

The company would only decide when to make a final investment decision on the project and when to start production during the FEED process, Yano added.

Asked to comment, Yopie Hidayat, a spokesman to the Indonesian vice president told Reuters that production is targeted for 2016, adding that this will be on schedule if Inpex starts building the floating LNG plant in 2012.

Inpex said in July that its joint venture with a Japanese government affiliate will sell a 30 percent stake in Indonesia's Abadi gas field in the Masela block to Royal Dutch Shell (RDSa.L).

The joint venture, which includes Japan Oil, Gas and Metals National Corp (JOGMEC), will retain a 60 percent stake and the remaining 10 percent will be held by the project's other operator, Indonesia-listed Energy Mega Persada , a unit of Bakrie group.

Shell Upstream Overseas Service Ltd has been selected as a strategic partner for the project to build the liquefied natural gas (LNG) floating terminal, a new technology, Inpex had said.

Shell's Prelude project, which is expected to come online by 2017 off the coast of Australia, will likely be the world's first floating LNG project, according to industry experts, although several other projects are also due to come online before the end of the decade. (Reporting by Andjarsari Paramaditha; Editing by Ramthan Hussain)