Bahlil on Andaman Gas Scheme: Seeking a Win-Win Deal

Bahlil Lahadalia Outlines Government’s Approach to Andaman Block Gas Management

Seeking Balance Between Economic Viability and Regional Interests

Tempatdonasi.com – The Indonesian government remains in deliberation over the optimal approach for processing natural gas from the Andaman Block, according to Energy and Mineral Resources Minister Bahlil Lahadalia. The minister emphasized that the final decision hinges on comprehensive economic analysis to ensure mutual benefits for all stakeholders involved.

During a press conference held in Banda Aceh on Saturday, July 11, 2026, Bahlil addressed media representatives following the inauguration ceremony for the Aceh Golkar Party’s Regional Leadership Board I executives. The minister explained that while Aceh’s regional administration has expressed strong preference for onshore gas processing within the Arun Lhokseumawe Special Economic Zone, the government cannot commit to this arrangement without thorough evaluation.

“I cannot make a decision yet because it is still under discussion. We need to find a win-win solution [regarding Aceh’s demand]. We cannot say yes if the cost is too high,” Bahlil Lahadalia stated.

Business Considerations Drive Decision-Making Process

Bahlil highlighted that the ultimate management of the Andaman Block gas resources fundamentally represents a business matter. The minister clarified that economic calculations will determine whether Aceh’s request for onshore processing can be successfully accommodated. Should financial projections demonstrate favorable outcomes, the government would likely approve the Aceh administration’s proposal.

Conversely, if the economic analysis reveals substantial challenges, implementing the onshore gas processing scheme might prove difficult. Bahlil stressed that commercial enterprises should not operate at a loss. Every arrangement must generate profitability for both local communities and international investors, with revenue sharing mechanisms ensuring equitable distribution of benefits.

“Because no business is meant to end in a loss. Everything has to be profitable—profitable for the people of Aceh in terms of their revenue, and profitable for the investors. And we can all share in that revenue,” the minister explained.

Technical and Economic Challenges of Onshore Processing

The Andaman Block gas discovery by Mubadala Energy represents a significant development for Indonesia’s energy sector. In its initial operational phase, Mubadala Energy aims to achieve production capacity of 300 million standard cubic feet per day, commonly abbreviated as MMSCFD. This substantial volume positions the discovery as a potentially major contributor to national energy supply.

Following the gas discovery announcement, Aceh Governor Muzakir Manaf, widely recognized by his nickname Mualem, formally communicated with both President Prabowo Subianto and the Energy and Mineral Resources Minister. The governor’s correspondence addressed the management framework for oil and gas resources within the Tangkulo South Andaman Field, which Mubadala Energy has been developing.

The Aceh regional government specifically advocated for an onshore receiving facility scheme operating on land, preferably situated within the Arun Lhokseumawe SEZ. This approach would eliminate reliance on Floating Production, Storage, and Offloading vessels or offshore processing alternatives. Additionally, Aceh requested that a designated portion of Mubadala’s gas production be reserved for powering local industrial operations within the province.

Bahlil provided technical context regarding the geographical challenges involved. The Mubadala gas discoveries lie more than twelve nautical miles from the coastline. Establishing an undersea gas pipeline to transport resources to shore would necessitate considerable capital expenditure. Such substantial investment could potentially elevate gas prices beyond ten dollars per million British thermal units, rendering the product less competitive in international markets.

“If we build the pipeline, the cost is indeed high, and that will not yield a competitive selling price. It could reach above $10 per MMBTU,” he noted.

Domestic Distribution and Long-Term Sustainability

Regarding the allocation of produced gas, Bahlil indicated that portions would be directed to state-owned electricity utility PLN alongside local industrial consumers. Pupuk Iskandar Muda, a prominent fertilizer manufacturer in Aceh, represents one of the key domestic recipients. Currently, this facility depends on liquefied natural gas sourced from Papua, Sulawesi, and Kalimantan regions as essential raw material inputs.

The minister expressed optimism that future arrangements could enable Pupuk Iskandar Muda to source a portion of its requirements directly from the Andaman Block, potentially reducing transportation costs and strengthening regional energy independence.

Bahlil concluded by emphasizing that Mubadala Energy holds the concession rights for the Andaman Block. The government’s responsibility extends beyond immediate economic calculations to ensuring long-term project sustainability and meaningful contributions to Acehnese welfare. Profit-sharing arrangements form an integral component of this comprehensive approach, ensuring that local communities benefit substantially from the resource development.

The government’s careful deliberation reflects its commitment to balancing commercial viability with regional development objectives, ultimately seeking arrangements that deliver sustainable benefits for investors, local industries, and the broader population of Aceh.