EMP may sell $1b of gas to PLN

EMP may sell $1b of gas to PLN

JAKARTA: PT Energi Mega Persada (EMP), Indonesia's second- largest publicly traded oil and gas producer, said it's in talks to sell about $1 billion of natural gas to state utility PT Perusahaan Listrik Negara (PLN).

EMP may sign a contract to supply 389 trillion British thermal units of gas from its Kangean block off East Java at a price of US$2.60 per million British thermal unit for 17 years starting 2007, the company said in a statement to the Jakarta Stock Exchange on Thursday.

PLN is cutting oil use in favor of gas and negotiating better terms with suppliers in an effort to reduce its fuel bill. The power producer said on Oct. 27 it may have to pay EMP $3 billion for 120 million cubic feet of gas over 15 years at a price of $5 per million British thermal unit.

The gas would come from Energi Mega's PT EMP Kangean Ltd. unit which operates the Kangean block acquired from BP Plc last year. The fuel is for PLN's power plants in Grati and Gresik in East Java. The utility has said it plans to sign the gas supply contract by the end of this month.

PLN plans to boost the use of gas to 40 percent of its needs by 2007 from about 27 percent now. The company's cost of buying oil products will rise Rp 7.5 trillion ($740 million) this year because of higher crude oil prices, the power producer said on Aug. 26. -- Bloomberg