BP Migas signs three gas sale agreements
Leony Aurora, The Jakarta Post, Jakarta
Gas field operators, state power firm PT PLN and a local company signed on Tuesday three gas sale and purchase agreements for a period of between five and 16 years, worth a total of US$1.4 billion.
The ceremony, hosted by the Oil and Gas Upstream Regulatory Agency (BP Migas), also saw the signing of a memorandum of understanding between the Joint Operating Body Pertamina Amerada Hess Jambi Merang and state gas distributor PT Perusahaan Gas Negara.
"This indicates our strong commitment to prioritizing the domestic utilization of gas," said BP Migas chairman Kardaya Warnika.
Gas from the Kepodang field in the Muriah block, Central Java, operated by Petronas Carigali Muriah Ltd., will be channeled to power plants in Tambak Lorok, Central Java, which have a total capacity of 1,260 megawatts.
"Petronas needs 30 months to prepare for the distribution of the gas," said PLN's director of power plants and primary energy generation, Ali Herman Ibrahim. "It will be distributed starting at the end of 2007 and lasting for 10 years."
Petronas will supply 145 billion British thermal unit per day (bbtud) to Tambak Lorok, at a price of US$2.78 per million British thermal unit (mmbtu), said Ali.
PLN also signed an agreement to purchase some 15 bbtud from Kalila Operator Ltd. to supply a power plant in Teluk Lembu, Riau, for the next 16 years.
Kalila will provide gas starting in July at prices of between $2.65 and $2.75 per mmbtu from its fields in Sumatra.
The Indonesian unit of Chinese oil giant PetroChina has extended its contract for another five years to provide 1.2 bbtud from its Salawati field in Papua for Henrison Iriana, a plywood producer based in the province.
Amid surging global oil prices and an oil production output that is falling at a rate of 6 percent per year, the government is pushing the use of gas, both in industries as well as in power generation.
The government hopes to increase gas usage from 31 percent for the entire country this year to 39 percent in 2020, while pushing down the use of oil from 55 percent at present to between 10 percent and 15 percent in 15 years.
Kardaya said several other gas sale agreements were ready to be signed in the near future, pending the completion of assessments by the agency's legal team.
During the ceremony, the BP Migas chairman also reiterated the agency's plan to provide incentives for the exploitation of marginal gas fields deemed uneconomical for exploitation under current terms and conditions.
"This will be for fields supplying gas for domestic use," said Kardaya.
A draft regulation on the incentives, which would follow another incentive program for marginal oil fields launched a month ago, is expected to be finished within two months.