ARCO to push on with Irian gas project despite crisis
ARCO to push on with Irian gas project despite crisis
JAKARTA (JP): The U.S. Atlantic Richfield Co (ARCO) and
British Gas (BG) are pushing on with their Tangguh liquefied
natural gas (LNG) project in Irian Jaya despite the global
downturn in demand.
ARCO Indonesia president and resident manager Leon Cordon said
Wednesday the company and partners, including state oil and gas
company Pertamina, would concentrate on engineering and
negotiations with prospective buyers, primarily from Japan and
Korea, over the next 24 months.
"We are also talking with bankers for financing," Cordon said
following a meeting with President B.J. Habibie.
ARCO chairman and chief executive officer Mike R. Bowlin and
Pertamina's president Soegianto also attended the meeting.
Cordon said it would take between two years and two-and-a-half
years to raise the necessary project financing.
"Then we have about another three years for the construction
work," he added.
Total investment is projected at US$4 billion, with the plant
expected to start production in 2003 or 2004, he said.
The plant will be fed with natural gas from three production-
sharing blocks, including the Muturi Block operated by BG and the
Wiriagar and Berau blocks which are both operated by ARCO.
Muturi is 52.63 percent owned by BG Exploration & Production
Ltd., with the remaining share held by Cairns Ltd, a subsidiary
of Malaysia's Genting Bhd.
Wiriagar is jointly owned by ARCO (80 percent) and Kanematsu.
Berau is 48 percent owned by ARCO, 17.144 by Nippon Oil, 12
percent by Kanematsu and 22.856 by Canadian Oxy. Ltd.
ARCO and BG have certified 14.4 trillion cubic feet (tcf) of
gas reserves in their Tangguh area off the remote province. The
area also has another 3.9 tcf of probable gas reserves and 3 tcf
of possible gas reserves.
According to Cordon, the gas reserves found are equivalent to
reserves in Arun, North Sumatra.
The total proven and probable natural gas reserves of 18.3 tcf
in the three blocks mean the Tangguh plant will be able to yield
more than 9.0 million tons of LNG a year.
Under the production-sharing contract with Pertamina, the
international contractors have to sell the gas to the local firm.
ARCO and partners will build two LNG trains with an output of
6 million tons of LNG in the first year of production, Cordon
said.
Bowlin said Habibie fully supported the project.
"Tangguh is the key to preserving Indonesia's position as the
world's leading LNG supplier and a major future source of foreign
exchange for the country," he said.
He said the project would lead to considerable infrastructure
and community development in the province, creating 8,000 jobs
during construction and 1,000 operating positions after start-up.
Bowlin noted that Tangguh LNG could also be marketed to the
domestic market as a replacement for crude oil products.
The country could enjoy many benefits from substituting crude
oil fuels with natural gas, he said.
"By switching power generators and industrial users from
imported diesel fuel to domestic natural gas, Indonesia could
realize savings ranging from $100 to $200 million annually.
"In addition, domestic natural gas utilization is
environmentally friendly."
Arco, present in the country for 30 years, also produces oil
in its Offshore Northwest Java contract area and gas from the
Kangean Block in East Java. (jsk)