BP to sell gas blocks to Petronas and EMP
Fitri Wulandari, The Jakarta Post, Jakarta
British energy giant BP Plc expects to wrap up deals to sell two gas blocks to local firm PT Energy Mega Persada (EMP) and Malaysia's Petroliam National Bhd. (Petrona) later this month, the company said on Thursday.
President of BP Indonesia Bill Schrader said the company would sell its Kangean block in East Java to EMP, and the Muriah block off the coast of Central Java to Petronas.
"We reached an agreement to sell them. We are in the process of closing the deals with the target of closing by the end of the month," Schrader said in Denpasar.
He declined to disclose the value of the transactions.
The company is selling the blocks because it wants to focus on larger projects such as the Tangguh liquefied natural gas (LNG) plant project in Papua.
"BP's strategy on exploration are to go after much bigger opportunities like Tangguh. We really want to focus on getting the Tangguh project launched and finding customers," Schrader said.
BP inked an LNG deal worth US$2 billion with South Korean steel maker Posco on Thursday. Under the sales and purchase agreement, BP will supply 550,000 tons of the fuel for 20 years to Posco from its Tangguh LNG plant starting in 2005.
The company is also seeking to finalize LNG contracts with South Korean power company K Power, formerly known as SK Corp., and U.S. energy firm Sempra Energy.
The contract on the Kangean block ends in 2010 and BP had been lobbying the government to extend the contract, but the government has yet to give its final approval.
Schrader said EMP, as the new owner, was now responsible for getting the contract extended.
"EMP will continue the process we have started of trying to get an extension so that it can get to Terang Sirasun field and develop more natural gas in East Java," he said.
A contract extension would allow EMP to explore and develop the Terang Sirasun field, which is thought to have huge gas deposits and could help ease the current natural gas shortages in East Java.
BP has operated the Kangean block since 1980. Production started in 1994 with the Pagerungan gas field. According to the Oil and Gas Upstream Regulatory Body, Pagerungan supplies between 150 million and 175 million standard cubic feet of gas.
The company acquired Muriah from Shell in 1991 and carried out initial explorations in 1997. The contract to operate Muriah expires in 2021.