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.