EMP signs $1.9b in gas contracts
Leony Aurora, The Jakarta Post/Jakarta
The second largest publicly listed domestic oil and gas company PT Energi Mega Persada (EMP) has signed a natural gas sales agreement worth US$1.9 billion in total for customers in East Java for a span of between two and 16 years.
The company's subsidiary EMP Kangean Ltd. will supply the gas from its Terang Sirasun and Rancak fields in the province for state companies PT Perusahaan Listrik Negara (PLN), PT Perusahaan Gas Negara (PGN), PT Pertamina and local gas company PT Indogas Kriya Dwiguna, Eddy Purwanto, of the Upstream Oil and Gas Regulatory Agency (BP Migas), said.
"The gas to be sold in the agreements today reaches a total of 675 trillion British thermal unit (tBtu)," Eddy explained during the signing ceremony on Friday.
EMP Kangean will supply PLN, the country's power firm, some 130 million standard cubic feet per day (mmscfd) for 16 years, or equivalent with 369 tBtu, starting 2008 in a contract worth $1.07 billion.
The gas, which will be used to fuel its Gresik and Grati power plants in East Java, is sold at $2.9 per million British thermal unit (mmBtu), BP Migas chairman Kardaya Warnika told reporters.
PLN is seeking to replace as much petroleum-based fuel with cheaper gas or coal, especially after the government required the PLN to pay market prices for high-speed diesel.
The Gresik plant, which can use gas as well as oil-based fuel to generate power, gets gas from Kideco and EMP Kangean, but requires a greater supply to convert more units into cheaper fuel. Grati's combined-cycle plant burns oil-based fuel due to the unavailability of gas.
In an attempt to expand its business, state oil and gas firm Pertamina will buy 100 mmscfd of gas from EMP starting in 2008 at $2.8 per mmBtu. The contract, worth $627 million for 220 tBtu, spans a period of ten years.
"We will resell the gas through a unit called Pertagas," Pertamina's vice president Mustiko Saleh said. Pertagas, which will be fully established early next year, will also be in charge of selling gas from Pertamina's fields in the eastern part of Java, including the yet-to-be-developed Cepu block.
EMP also signed a short contract (two years) to supply additional gas amounting between 10 mmscfd and 15 mmscfd to distributor PGN starting the end of this year. The gas is sold at $2.8 per mmBtu.
PGN has been forced to apply a quota-system on larger industries in East Java since July, reviewing the allocation monthly, as supply from gas fields operated by Lapindo Brantas and EMP Kangean decline.
EMP will supply between 7 mmscfd and 20 mmscfd for Indogas. The contract, with gas sold at $2.9 per mmBtu, will commence in 2008 for 10 years.