Clinton, Soeharto to see signing of LNG contract

JAKARTA (JP): U.S. President Bill Clinton and Indonesian President Soeharto are expected to witness the signing of a contract for a US$34 billion natural gas liquefaction project in Natuna of Riau.

"We are trying to put the signing of the contract for the development of a liquefied natural gas (LNG) plant in Natuna into the agenda of President Clinton during his Indonesian visit to attend the second leadership meeting of the Asia Pacific Economic Cooperation (APEC) in mid November," Minister of Mines and Energy I.B. Sudjana told reporters after opening a one-day seminar on power generation yesterday.

Sudjana said that both the state oil company Pertamina and its contractor Esso Natuna Inc., an affiliate of the U.S. Exxon Corp., are finalizing their negotiations on the development of the LNG project in Natuna -- about 1,110 kilometers (km) north of here and about 600 km northeast of Singapore.

"The two parties are expected to conclude negotiations soon on two main issues -- on taxation and the royalty payment." he said.

He acknowledged that a requirement on the use of local components for the gas project has also been one of the difficult subjects negotiated by the two parties.

The two parties have reportedly agreed on the use of local contents worth $34 billion, of which $10 billion will be implemented during the construction of the project.

Esso has reportedly invested around $16 billion for the initial development of the gas field in the Natuna bloc since its first operation in 1980. Operating under a production sharing contract with Pertamina, Esso holds a 50 percent interest in the project. The other 50 percent is held by Pertamina.

The project, supported by the largest concentration of gas reserves in the world, is planned to have six treating platforms, six drilling platforms (each with 36 wells), two living quarters platforms and four injection platforms.

The treating platforms are designed to be capable of the bulk extraction of carbon dioxide.

Once the project is completed it will be able to produce up to 14 million tons of LNG per year. In comparison, the LNG plants in Arun, North Sumatra, and in Bontang, East Kalimantan, are capable of producing a total of 25 million tons of LNG per annum.

The gas deposits in Natuna are estimated at 45 trillion cubic feet, an Esso report said. (fhp)