Jakarta. Indonesia's government is under mounting pressure to swiftly decide the development scheme for the giant South Andaman gas project after Aceh requested a revision to its approved development plan, raising concerns that prolonged uncertainty could delay billions of dollars in investment.

The pressure intensified after Aceh Governor Muzakir Manaf sent a letter to President Prabowo Subianto seeking a review of the approved Phase I Plan of Development (PoD) for the Tengkulo gas field.

The Energy and Mineral Resources Ministry has approved a development plan using a floating production, storage, and offloading (FPSO) facility, allowing gas to be processed offshore. Aceh's provincial government, however, wants the gas transported to shore through pipelines and processed at the Arun Special Economic Zone in Lhokseumawe.

Pri Agung Rakmanto, founder of the ReforMiner Institute, said multibillion-dollar upstream oil and gas projects require regulatory certainty from planning through production.

"The decision should be based on technocratic considerations, not populism. It must follow sound technical and economic assessments that allow the investment to move forward instead of being repeatedly postponed," Pri Agung told Investor Daily on Sunday.

South Andaman is an offshore oil and gas block located about 100 kilometers off northern Sumatra, beyond Indonesia's 12-nautical-mile territorial waters.

Pri Agung warned against repeating the experience of the Masela Block, where years of debate over whether gas should be processed offshore or onshore significantly delayed development. Masela's initial PoD, approved in 2010, adopted a floating liquefied natural gas (LNG) concept before then-President Joko Widodo ordered the facilities moved onshore in 2016.

"In my view, Masela is not a good example of investment certainty or the timely development of a large-scale gas field," he said.

He pointed to the Tangguh gas project in Bintuni Bay, Papua, as a more appropriate reference for large-scale upstream investment.

Energy Minister Bahlil Lahadalia said the government's consideration of Aceh's proposal would ultimately depend on its economic feasibility.

"I cannot make a decision yet because the discussions are still ongoing. We have to find a win-win solution. We cannot simply choose one option if the costs are too high," Bahlil said.

Bahlil said commercial viability remains the primary consideration. If the economics support the proposal, the government is open to processing the gas onshore. However, he warned that forcing an uneconomic option would discourage investment.

"No business is designed to lose money. Everyone has to benefit — the people of Aceh through greater revenues, the investors, and the government through revenue sharing," he said.

He explained that Mubadala Energy's gas discovery lies more than 12 nautical miles offshore, making pipeline construction expensive and potentially pushing gas prices above $10 per million British thermal units (MMBtu).

"Building the pipeline would significantly increase costs and make the gas price uncompetitive. It could exceed $10 per MMBtu," he said.

The project is expected to produce around 300 million standard cubic feet of gas per day (MMSCFD) in its initial phase. Part of the output is planned to supply state electricity company PLN and fertilizer producer Pupuk Iskandar Muda (PIM), which currently relies partly on LNG shipped from Papua, Sulawesi, and Kalimantan.

"We want part of PIM's feedstock requirements to be supplied from the Andaman Block," Bahlil said.

He added that because Mubadala Energy holds the concession, the government must ensure the project remains commercially sustainable while delivering tangible benefits to Aceh.

Aceh government spokesperson Nurlis Effendi previously said the governor's letter was received by the State Secretariat Ministry on June 30. Among its key proposals is a review of the production-sharing arrangement, arguing that Aceh's current entitlement of 4% for gas and 6% for oil under the approved PoD should be reassessed to better reflect both national and regional interests.

Beyond natural gas, the South Andaman field is also expected to produce around 7,500 barrels of condensate per day. The condensate can be refined into products such as naphtha, kerosene, and gasoline, providing feedstock for petrochemical, paint, and fuel industries.

"Condensate will become the catalyst for establishing a refinery. The real economic impact will emerge once downstream industries begin operating," Nurlis said.

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