BP ready to revise gas supply concession
BP ready to revise gas supply concession
Moch. N. Kurniawan, The Jakarta Post, Jakarta
BP Indonesia, a unit of British-American oil and gas firm BP Plc., said it expected to reach an initial understanding with the state-owned oil and gas firm Pertamina within the next few days on the revision of BP's concession for the supply of gas in East Java.
"Yes ... we'll talk with Pertamina on this issue. We hope to gain a good understanding of alternative solutions," BP Indonesia vice president for government and public affairs Satya W. Yudha told The Jakarta Post on Thursday.
He said that BP was willing to revise the contract.
He was reluctant to provide further details.
BP, through a subsidiary called BP Kangean, holds a concession to supply some 600 million cubic feet per day (mmscfd) of gas to East Java until 2010 as agreed under a contract signed by Pertamina in 1980.
Other oil and gas firms are only allowed to supply gas if the demand in the province exceeds 600 mmscfd.
But as BP Kangean gas output continues to decline, the government thinks it is unfair to maintain a contract that prohibits others from bringing in the necessary supplies.
BP Kangean gas output stood at around 300 mmscfd in September last year, and at 250 mmscfd in February this year.
It the contract is maintained, East Java would suffer a gas shortage in 2004.
To avoid such an eventuality, the government is considering canceling BP Kangean's concession.
Several gas firms have expressed their readiness to supply gas to East Java. They include Pertamina, Kodeco, Mobil Cepu and Madura, and Lapindo Brantas.
The state-owned electricity company PLN, one of the major gas customers in East Java, said it has been suffering shortages since early this year, forcing the company to use diesel fuel as an alternative.
PLN's director for distribution and marketing Tunggono said the switch to diesel fuel had raised the company's cost of production by 10 percent to 15 percent.
"But we have no choice. Otherwise our power plant would be unable to operate," he said.
PLN operates a gas-fired power plant in Gresik, East Java, which according to a PLN official, consumes about 200 million standard cubic feet per day (mmscfd) of gas.