Exxon asks for buyers' guarantee before developing block in Aceh<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
As negotiations to develop the Block A gas field in Aceh
\ncontinue, ExxonMobil Oil Indonesia, which with ConocoPhilips hold
\nthe concession rights to the field, has requested a payment
\nguarantee from buyers.<\/p>\n
The guarantee would ensure that the natural gas reserved for
\nspecific buyers would be paid for in full, Kardaya Warnika,
\nchairman of the Upstream Oil and Gas Executive Agency (BP Migas),
\nsaid on Tuesday.<\/p>\n
"In other countries such guarantees may be (in the form of) an
\nSBLC," he said, using the acronym for a standby letter of credit.<\/p>\n
A letter of credit is issued by a bank to guarantee that a
\nbuyer can pay the seller. These letters of credit can be used for
\nunspecified transactions, simply to ensure a buyer will not
\ndefault.<\/p>\n
The government is pushing ExxonMobil and ConocoPhilips, each
\nof which holds a 50 percent stake in the field, to speed up
\nexploration of the block in Lhokseumawe, where three gas fields
\n-- Alur Siwa, Alur Lambong and Julu Rayeu, with a combined
\nreserves of about 500 billion standard cubic feet (bscf) -- are
\nlocated.<\/p>\n
Development of the fields has taken on new urgency as output
\nfrom the nearby Arun gas field, which is operated by ExxonMobil,
\nhas declined, forcing fertilizer plants in the province, which
\ndepend on gas from Arun, to slow down or halt production.<\/p>\n
"We want to start developing (the block) this year," said
\nKardaya.<\/p>\n
The main stumbling block in the negotiations is the pricing
\nand production sharing contract (PSC) with the government.<\/p>\n
Kardaya said the gas producers wanted a price of about US$3.20
\nper million metric British thermal unit (mmbtu), higher than
\nprice paid by domestic users.<\/p>\n
"If PIM agreed to such a price, (the negotiation) would be
\nalmost over," said Kardaya, referring to Pupuk Iskandar Muda, a
\nmajor fertilizer producer in Aceh.<\/p>\n
The government has allowed PIM and another fertilizer
\nproducer, ASEAN Aceh Fertilizer, to export some of their
\nproduction, provided they can meet demand in the province, to
\nenable them to afford higher gas prices.<\/p>\n
Minister of Industry Andung A Nitimihardja was quoted as
\nsaying on Tuesday that PIM could only pay $3.20 per mmbtu.<\/p>\n
Kardaya also said discussions on production sharing between
\nthe government and the two concession holders had not been
\nconcluded.<\/p>\n
"After the price is fixed, then we will talk about the split,"
\nhe asserted.<\/p>\n
ConocoPhilips reportedly has asked for half of what is
\nproduced in Block A, while the government is offering 49 percent.<\/p>\n
A normal production sharing contract stipulates that the
\ngovernment gets 70 percent of output. The split at Block A will
\nbe different because it has relatively small gas reserves. The
\ngas also has a high sulfur content, making it more expensive to
\nexploit.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/exxon-asks-for-buyers-guarantee-before-developing-block-in-aceh-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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