BP Kangean to sign new deal with Pertamina

BP Kangean to sign new deal with Pertamina

Moch. N. Kurniawan, The Jakarta Post, Jakarta

British American oil and gas firm BP Indonesia said it had agreed
to prematurely end its gas supply concession in East Java, and
expected its unit BP Kangean Ltd. to sign a new contract with
state-owned oil and gas firm Pertamina next week.

"We expect to complete negotiations next week," BP Indonesia
vice president for government and public affairs Satya W. Yudha
told The Jakarta Post on Friday.

BP Kangean holds a concession to supply some 600 million cubic
feet per day (mmscfd) of gas to East Java until 2010. Under the
contract, signed in 1980, no other suppliers can enter the
provincial market unless demand exceeds the 600 mmscfd level.

But as the company's gas reserves in the Pagerungan field have
been declining, BP Kangean could not meet the growing gas demand
in the province, thus creating a potential gas shortage problem.
The gas customers are huge companies like state-owned electricity
company PLN, which has started to purchase industrial diesel fuel
as a substitute for gas.

This has forced the government to renegotiate the original
contract, to allow other suppliers to enter the market.

Although the original concession is still valid, other gas
suppliers have actually been allowed to enter the East Java
market supplying a limited volume of gas. They are Lapindo
Brantas and Kodeco Energy Co.

Under the new contract currently being negotiated, BP
Kangean's gas supply this year would be limited to 228 mmscfd and
down to 146 mmscfd next year, Dharma I. Jenie, a BP Kangean
official, said.

Meanwhile, Satya said that with BP now ready to terminate the
East Java gas concession, the company expected the government to
extend BP's operation contract in the Terang Sirasun gas field,
which is to expire in 2010.

The Terang Sirasun field will also supply gas to the East Java
market.