BP gas contract must be reviewed, says minister

The Jakarta Post, Jakarta

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Tuesday that the government planned to review gas supply contracts with BP Indonesia for the Pagerungan gas field in Madura Island, reported Antara.

"There will be a review...because the contract seems monopolistic and gives privileges to the operator," he said, referring to BP Indonesia, which belongs to Anglo-American energy giant BP Plc.

Purnomo claimed that when the contract was made, the structure of the gas market was still monopolistic and gave gas producers a stronger bargaining position against consumers.

At the time, he claimed, the government was forced into signing the contract because East Java province badly needed the gas from the Pagerungan gas field to run its booming industry.

Under the contract, BP Indonesia is required to supply about 600,000 million cubic meters of gas per day. The contract also stipulated that other gas operators were not allowed to invest in the province unless its gas demands exceeded 600,000 million cubic feet of gas daily.

Purnomo said that BP Indonesia could only supply about 180,000 million cubic feet of gas per day, which caused East Java to fall short by over Rp 400,000 million cubic feet of gas.

Purnomo said that gas market today was no longer monopolistic, but competitive, which enabled consumers to take control.

In the meantime, BP Indonesia could not be reached for comment.

Recent gas leaks have forced BP to shut down five gas fields in the Pagerungan contract area, which has also reduced gas supplies to only 100,000 million cubic feet per day.

State-owned oil and gas company Pertamina president Baihaki Hakim has blamed BP for the incident, saying that it was caused partly by BP's negligence in maintaining the gas pipeline.