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)