Bakrie firm awarded extension for oil block
Dadan Wijaksana, The Jakarta Post, Jakarta
PT Energy Mega Persada (EMP), a local oil and gas firm controlled by the Bakrie Group, will be awarded a contract extension of 20 years to develop giant Kangean oil and gas block in East Java, according to government officials.
Iin Arifin Takhyan from the directorate general for oil and gas at the energy ministry, said the government and the EMP were finalizing the negotiations, with the signing of the new contract expected to take place on Dec. 12.
"We're still finalizing the details, but we expect to complete it before Dec. 12, when we hope to sign the new contract, which will extend EMP's rights to develop the Kangean block for another 20 years," Iin told The Jakarta Post on Thursday.
The block was previously operated by Anglo-American energy giant BP Plc., which sold the block to EMP in July this year. Since the acquisition, EMP has been lobbying for an extension of the current contract, which expires in 2010.
Efforts to seek confirmation from the firm were unsuccessful.
There have been three major gas fields discovered within the block, that is Pagerungan, Terang Sirasun and Batur.
To date, only Pagerungan has actually produced gas. Data from the Oil and Gas Upstream Regulatory Body (BP Migas) shows that Pagerungan field can produce between 150 million and 175 million standard cubic feet per day (MMSCFD) of gas.
A contract extension would allow EMP to explore and develop the Terang Sirasun field, which is believed to have abundant gas deposits.
In total, the Kangean block has reserves estimated to be 2.6 trillion cubic feet of gas, including about 1.3 trillion cubic feet of certified (proven) reserves.
With such an amount, Kangean is expected to generate billions of dollars in income for EMP, which bought the block from BP for only about US$160 million.
By comparison, in August this year, U.S. energy firm ConocoPhillips signed a contract to sell a total of 2.3 trillion cubic feet of gas from its fields in central Sumatra to Perusahaan Gas Negara (PGN), the state gas distribution company, for a reported price of US$4.3 billion. The gas will be delivered to West Java and Banten.
Elsewhere, the ministry's Director for Oil and Gas Novian M. Thaib, also confirmed that the negotiations were nearing completion.
"Basically what we're trying to seek in the negotiations is the company's commitments on using the natural gas it produces to boost the supply and meet the increasing gas demand in the province," said Novian.
Based on BP Migas data, natural gas demand in East Java for power plants, gas distribution firm PT Perusahaan Gas Negara (PGN) and petrochemical companies reached 424 MMSCFD in 2002.
It is projected to increase to 573 MMSCFD by 2007.
EMP is controlled by the Bakrie Group, a business conglomerate run by the Bakrie family. The current Coordinating Minister for the Economy Aburizal Bakrie was a former top executive in the family firm.