BP may get extension of its Kangean gas contract
BP may get extension of its Kangean gas contract
A'an Suryana, The Jakarta Post, Jakarta
Despite a well-publicized gas pipe leak, Anglo-American energy
giant BP Plc is likely to get an extension from the government
for its Kangean gas contract in East Java.
The Oil and Gas Implementing Body (BP Migas), which holds the
authority in overseeing the implementation of oil and gas
production-sharing contracts in the country, has apparently sent
to the Ministry of Energy and Mineral Resources its endorsement
of the extension.
BP Migas chief Rachmat Sudibyo said on Thursday that his
institution had given its approval on the grounds that the
Kangean Block still had potential for further development and BP
Plc was capable of doing just that.
The production-sharing contract with BP Plc for the Kangean
Block will expire on Nov. 13, 2010.
"Our recent feasibility study shows that the Kangean Block has
approximately one trillion cubic feet of gas reserves," Rachmat
told reporters after a hearing with the House of Representatives
(DPR).
Besides the reserves, other considerations that BP Migas had
taken in endorsing the gas contract extension included
investment, future profits and BP Plc's technological capability.
BP Migas endorsed the contract extension just a month after
the gas pipe leak in BP Plc's Pagerungan field, which is located
in Kangean.
The gas leak has forced BP Plc to shut down five other gas
fields in the Pagerungan contract area. This shutdown has
resulted in the reduction of gas supply to East Java to 100
million cubic feet per day (MMCFD) from 180 MMCFD.
As a result, the declining amount has put hundreds of
businesses in East Java in disarray.
The controversial gas leak prompted criticism from several
parties, including from BP Plc's competitor state oil and gas
company Pertamina, which condemned BP Plc and called their pipe
maintenance "negligent".
However, despite the incident, Rachmat said that BP Plc should
be given a chance to produce and manage the gas fields in the
Kangean Block.
"The gas leak was purely accidental," said Rachmat, adding
that BP Plc was professional and technologically capable of
finding new gas reserves, produce gas and manage the gas fields
in Kangean.
As of the end of 2002, BP Plc had produced 11.74 million
barrels of oil and 947 billion cubic feet of gas.
It has been estimated that the gas production will
continuously diminish to 100 MMCFD in 2005 and 20 MMCFD in 2010,
from current production level at 180 MMCFD, due to diminishing
gas reserves in the old fields.
With the gas contract extension, BP Plc could explore new gas
reserves in Terang Sirasun and Batur, which lie within the
Kangean Block, so that BP Plc could increase gas production by 60
more MMCFD in 2006 and 300 MMCFD in 2006.
The production increase is needed to prevent future gas
shortages in East Java, said Rachmat.