Indonesia considers onshore LNG plant for Masela

JAKARTA, July 3 (Reuters) - Indonesia is considering building an onshore liquefied natural gas (LNG) plant for natural gas reserves from the Timor Sea, operated by Japan's Inpex Corp (1605.T), to cut costs, the mines and energy minister said on Friday.

Originally, Indonesia had in principle agreed with the Inpex plan to build a floating LNG plant, which Indonesia's oil watchdog estimated would cost $19.6 billion.

"We are studying to build an onshore LNG plant for Masela gas reserves, because a floating plant is very expensive," Purnomo Yusgiantoro told reporters.

"We consider Tanimbar islands about 150 kilometres east of Masela can be used for an onshore plant. We believe the cost of an onshore plant will be cheaper, maybe only 25 percent of the original proposal," he added.

Inpex, the operator of the Masela block, estimates there is more than 10 trillion cubic feet of natural gas reserves in its Abadi field in the Timor Sea, potentially one of Indonesia's top fields.

If confirmed, it would make the project the second-biggest new gas field after the Tangguh project in Papua, which has combined reserves of 14.4 tcf and is about to make its first shipment, after several delays to the original timetable. [ID:nJAK354007]

Purnomo said the onshore plant study will conclude as soon as possible and expects the plant could be onstream in 2013 or 2014.

The floating platform the project is expected to be on stream in 2016.

Indonesia's energy watchdog BPMIGAS has said previously that Inpex will build one LNG train with a capacity of 4.5 million tonnes a year. (Reporting by Muklis Ali; Editing by Michael Urquhart)