Contracts for Natuna gas fields to be extended

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto said the government would extend production sharing contracts (PSCs) on gas fields west of Natuna island to allow contractors to earn more revenue from the sale of gas to Singapore.

Kuntoro said the ministry had asked President B.J. Habibie to approve an extension to the three contracts for exploitation rights to gas in fields west of Natuna island in the South China Sea held by Britain's Premier Oil, Conoco of the United States and Canada's Gulf Resources.

"The contracts will be extended to cover the whole period of gas sales as requested by the contractors," Kuntoro said in a weekly press conference.

The three companies asked the government to extend their contracts as a condition for their participation in the final gas sale agreements that will be signed by state oil and gas company Pertamina and Sembawang Gas (SembGas) later this month.

Pertamina signed a preliminary gas sales agreement last July to supply SembGas with natural gas extracted from the West Natuna fields for 22 years from 2001 to 2023.

Gulf's contract on the Kakap block currently expires in 2005, while Premier's contract on the A Block and Conoco's contract on the B block will end in 2009 and 2018 respectively.

The contractors have asked the government to extend their contracts to cover the whole period of gas sales.

Under production sharing contracts (PSC), the government has the right to extend contracts after 30 years or transfer the development of oil and gas fields to Pertamina.

The contractors claim that they will invest US$1.5 billion to develop the gas fields and transportation facilities, including a 640 kilometer pipeline costing $400 million to carry gas from West Natuna to the island of Jurong off Singapore.

SembGas will use the gas to feed power and petrochemicals plants.

The gas will be the first Indonesia has exported through a pipeline. Indonesia is currently the world's largest exporter of liquefied natural gas (LNG). Most exports are directed toward South Korea, Japan and Taiwan.

Sale of the West Natuna gas will reportedly generate total revenue of $7.5 billion over 22 years, $2.4 billion of which -- or $180 million per year -- will go to the government in taxes and profit sharing. (jsk)