BP's East Java gas contract to be extended

BP's East Java gas contract to be extended

The Jakarta Post, Jakarta

Oil and Gas Upstream Authority Body (BP Migas) confirmed that
BP Indonesia, the local unit of Anglo-American energy giant BP
Plc., will get an extension of its contract to manage Terang
Sirasun gas block in East Java.

BP Migas chief Rachmat Sudibyo said the government would issue
a regulation at the end of this year to extend oil and gas
contracts.

"The regulation will regulate the extension of various
contracts. Thus, the contract of Terang Sirasun can be extended
early next year," Rachmat told reporters on Thursday.

Early this year, BP requested for the extension of its
production-sharing contract in the Kangean Block which includes
Terang Sirasun block. The contract expires on Nov. 13, 2010.

BP wanted the government to extend the contract first before
the company moves to increase investment and production in the
Terang Sirasun block.

Rachmat said the increase in gas production would be crucial
to help meet the growing demand in East Java province.

Gas demand in East Java is currently at around 424 MMSCFD
(million standard cubic feet per day) but it is expected to
increase up to 600 MMSCFD in 2007.

But supply from East Java gas producers has now declined
sharply to 290 MMSCFD from 390 MMSCFD previously. This is partly
due to a drop in the gas reserves in the Kangean block.

According to data compiled by this paper, gas production in
the Kangean block would continue to drop to 100 MMSCFD in 2005
and to 20 MMSCFD in 2010 from the current production level of 180
MMSCFD, due to diminishing gas reserves in the old fields.