Esso clinches US$35b Natuna gas project
Esso clinches US$35b Natuna gas project
JAKARTA (JP): Esso Natuna Inc. of the United States clinched a
deal yesterday with the state oil firm Pertamina for the
construction of a US$35 billion gas liquefaction project in
Natuna, Riau.
"All parties are satisfied with results of the final
negotiations on the Natuna gas liquefaction project," Pertamina's
president, Faisal Abda'oe, told reporters after the signing
ceremony at the company's headquarters here yesterday.
The ceremony, which was attended by Minister of Mines and
Energy I.B. Sudjana, was also marked by the signing of four
technical assistance contracts between Pertamina and domestic
companies.
Under yesterday's agreement, Pertamina and Esso will each hold
a 50 percent stake in the project and allocate 60 percent of
their planned gas production, after the recovery of investments,
for the government and the remaining 40 percent for themselves,
Abda'oe said.
The output share for the contractor is bigger than the
standard 30:70 ratio because Natuna gas contains a large portion
of poisonous carbon dioxide.
Pertamina's director of production and exploration, G.A.S.
Nayoan, said Esso agreed to increase the government's output
share if the carbon dioxide content is less than the original
estimate of 71 percent.
Concerning Pertamina's 50 percent stake in the project,
Abda'oe said that his company plans to sell up to 39 percent of
the stake in the Natuna project to private domestic sector
companies in the future.
"The main reason for the planned sale of its stake is to
involve prospective investors to support the mega project," he
said.
Abda'oe said that the Natuna project will be subject to tax
treatment similar to that stipulated in the newly-amended tax
laws.
"Under the agreement, Esso Natuna Inc. will pay a 35 percent
tax on its income from the liquefaction project," he said. The
tax facility includes a five percent branch distribution tax.
The new tax ruling, which came into effect on Jan. 1, has
reduced the maximum income tax rate from 35 percent to 30 percent
for the income base of over Rp 50 million ($22,737). The ruling
also offers special tax incentives to investors operating in
frontier areas or under certain business priorities.
Abda'oe did not disclose whether Esso Natuna Inc. is entitled
to the tax incentives.
Investment
Abda'oe said Esso Natuna is committed to investing $100
million a year in the initial phase of the gas liquefaction
operations at Natuna -- about 1,110 kilometers north of here, or
600 kilometers northeast of Singapore.
Esso has reportedly invested around $16 billion for its
initial development of the gas field in the Natuna bloc since its
first operations in 1980.
Both Abda'oe and Nayoan declined to discuss the local contents
of the project, but a Pertamina report earlier said that the
state firm has proposed a requirement of 30 percent local content
in the project.
Abda'oe said that in the first phase of the Pertamina-Esso
cooperation, Esso will need at least three years to engineer and
design auxiliary facilities at the Natuna field, which is
designed to have a total of 18 platforms.
The platforms will include six for drilling, six for treatment
(each dealing with 36 wells), two for living quarters and four
for injection.
Abda'oe expected that the project, billed to be the largest
concentration of gas reserves in the world, would start its
initial commercial production within 10 years from now.
The project will be capable of producing up to 35 million tons
of LNG per year for 20 years.
Yesterday, Pertamina also awarded four technical assistance
contracts to PT Mayumi Megakerta Sasana for operating Pertamina's
old oil fields with an enhanced recovery method in Sungai Gelam,
Jambi, to PT Siddhakarya Pilona Sabaku at Sabaku and Salawati,
both in Irian Jaya, to PT Siddhakarya Pilona Salawati in Salawati
of Irian Jaya and to PT Mayumi Megakerta Sasana in the Ramok and
Senabing fields in South Sumatra. (fhp)