BP's E. Java gas supply privilege may be terminated
BP's E. Java gas supply privilege may be terminated
Moch. N. Kurniawan, The Jakarta Post, Jakarta
The government is considering discontinuing the privilege of
BP Kangean in supplying gas to East Java to allow other suppliers
to meet the growing demand in the province, according to Minister
of Energy and Mineral Resources Purnomo Yusgiantoro.
He said that the entry of new players was needed to avoid a
gas shortage as BP's gas reserves in the Kangean fields were
depleting.
"We're considering removing BP's privilege to avoid a gas
shortage," he said. "Other firms which are ready to supply gas
will not be able to do so without the removal."
He said that oil and gas firms which had expressed their
readiness to supply gas to East Java were Kodeco, ExxonMobil Cepu
and Madura, Lapindo Brantas, and state oil and gas firm
Pertamina.
Anglo American energy giant BP Plc acquired the Kangean fields
from American oil and gas firm Arco, which signed a contract in
1980 with Pertamina to be the sole supplier of up to 600 million
standard cubic feet per day (mmscfd) of gas from Pagerungan
Island via an underwater pipeline to East Java until 2010.
Under the contract, other players are only allowed to supply
gas to the province should the demand exceed 600 mmscfd.
But in the next two years, BP will be unable to meet its
supply target as gas output in Pagerungan continues to decline.
BP Kangean gas production stood at 330 mmscfd in September
last year and at 259 mmscfd in February this year.
The prime gas consumers in East Java are state-owned
electricity company PLN, fertilizer company Petrokimia Gresik and
other commercial users.
Pertamina could import oil-based fuel to substitute for gas
but it would be costly for the industries. The company is no
longer able to meet additional oil-based fuel demand from its
refineries due to limited capacity.
A source, however, said that the government should move
carefully in canceling the contract to avoid being sued by BP at
an international arbitration court.
A Switzerland-based arbitration court has ruled that Pertamina
must pay some US$261 million in compensation to independent power
producer Karaha Bodas Co. LLC after the government canceled its
contract in 1998.
BP officials were not available for comment.
Separately, PLN operations director Bambang Hermiyanto
admitted PLN would face a gas shortage in the near future due to
the privilege enjoyed by BP.
He pointed out that PLN's power plant in Gresik alone required
more than 200 mmscfd.