Companies sign $2.5b gas deals

Leony Aurora, The Jakarta Post, Jakarta

Gas field operators, state power firm PT PLN and fertilizer firms in Java signed on Thursday gas sales agreements (GSA) and heads of agreements (HOA) for a period of between six months and 20 years worth a total of US$2.5 billion.

Almost all of the gas will be produced by EMP Kangean Ltd., a subsidiary of local oil and gas producer PT Energi Mega Persada, while state oil and gas firm PT Pertamina will supply a small amount.

"The price is between $2.75 and $2.90 per million British thermal unit (mmbtu)," said EMP Kangean's senior vice president and general manager Suluhudin Noor.

"We have a commitment to help the government in supporting fertilizer supply, so we give (producers) lower prices," he added.

Witnessed by the Oil and Gas Upstream Regulatory Agency (BP Migas), EMP signed a GSA with fertilizer firm PT Petro Kimia Gresik in East Java to supply gas for 10 years, starting in the third quarter of this year.

The gas, amounting to 243.27 trillion British thermal units (tbtu) in total, will come from Rancak, Pagerungan and Terang Sirasun fields in the province.

The company will also sell gas to PLN for three years, amounting to 12.7 tbtu, to fire up power plants in East Java, as well as to state gas distributor PT Perusahaan Gas Negara for two years.

Pertamina has offered a slightly lower price of $2.55 per mmbtu to fertilizer firm PT Pupuk Kujang in West Java starting in 2006 for the following three years.

Aside from the definitive agreements, EMP also signed three HOAs with PLN, Petro Kimia and PT Indogas Kriya Dwiguna.

Petro Kimia, which plans to open a new plant, will require gas amounting to 265 tbtu starting in 2007 for 20 years. EMP will supply gas from its yet to be developed Terang and Sirasun fields.

"The fields will start producing in the last quarter of 2007 and hopefully will reach peak production a year after," said Noor. The fields will produce an estimated 320 million standard cubic feet (mmscfd) per day, he added.

PLN also signed an HOA with EMP to supply gas, totaling 342.2 tbtu, starting in late 2007, while Indogas requested 71.08 tbtu of gas over 10 years.

Soaring oil prices and the increasing burden of the fuel subsidy on the state budget have prompted the government to urge companies to reduce the use of fuel and turn to other sources of energy, such as coal and gas.