BP Migas demands speedy development in Natuna block<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The country's oil and gas sector's regulator will not support the
\nextension of U.S. energy giant ExxonMobil's contract in the gas-
\nrich Natuna D-Alpha block in 2007 if the contractor fails to
\ncommence production from the block.<\/p>\n
Oil and Gas Upstream Regulatory Agency (BP Migas) chairman
\nKardaya Warnika said on Wednesday that Exxon had to show definite
\nprogress sooner rather than later to develop the block and start
\nproduction, which had been stalled for the past decade with the
\ncompany still looking for buyers.<\/p>\n
"It's difficult for us to be given promise after promise,"
\nsaid Kardaya after a hearing with the House of Representatives.<\/p>\n
"If the block gets no market in two years and does not go into
\nproduction, why extend the contract?" he added.<\/p>\n
Exxon has said that it was trying to secure buyers for the gas
\nblock, which will be more expensive to develop as the gas
\ncontains 70 percent carbon dioxide.<\/p>\n
The company signed a memorandum of understanding (MOU) in 2002
\nwith Malaysia's Petronas and is in talks with Thailand's PTT Pcl
\nto supply gas from Natuna D-Alpha.<\/p>\n
"An MOU is not legally binding. What we need is gas sales
\nagreements," said Kardaya.<\/p>\n
Exxon has a 76 percent share in Natuna D-Alpha, the largest
\nuntapped-gas block in Asia with 46 trillion cubic feet of
\nrecoverable reserves, and acts as the operator. Pertamina owns
\nthe remaining 24 percent.<\/p>\n
Exxon's contract should have expired in January, but the
\ngovernment amended the agreement and gave a two-year extension.<\/p>\n
Meanwhile, to prevent contractors from stalling the
\nexploration and development of oil and gas blocks anywhere in the
\ncountry, BP Migas is proposing a guarantee before signing
\ncontracts.<\/p>\n
If contractors back out of their plans for blocks, the
\ngovernment can cash in the performance bonds, said Kardaya.<\/p>\n
"It's necessary so that they don't act as they please," he
\nsaid.<\/p>\n
If agreed to by the Ministry of Energy and Mineral Resources,
\nthe amount of the guarantee may depend on the commitment already
\npledged by the contractors, Kardaya said further.<\/p>\n
Experience shows that contractors stall block development for
\nvarious reasons.<\/p>\n
ConocoPhillips, the operator of Block A in Aceh, for example,
\ndid not start production in the block as it wanted a bigger gas
\noutput split than the 48 percent offered by the government.<\/p>\n
Many companies have also been reported to not have real
\nintentions of developing oil and gas blocks, but rather to work
\nas brokers. In the previous block tender, the government set a
\nminimum signing bonus of US$500,000 to minimize such practices.<\/p>\n
Indonesia is in dire need of new discoveries as the need for
\nthe fossil fuel is steadily rising while crude and condensate
\noutput is on the decline.<\/p>",
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