ExxonMobil to farm out share in Block A

Leony Aurora, The Jakarta Post, Jakarta

U.S. energy giant ExxonMobil will announce the winner of a tender to farm out its 50 percent share in Block A in Nanggroe Aceh Darussalam in the first quarter of next year, a government official says.

Exxon has closed the data room for companies interested in bidding for the block, chairman of the Upstream Oil and Gas Regulatory Agency (BP Migas) Kardaya Warnika said on Wednesday.

"The company will announce the winner at the end of the first quarter of 2006," said Kardaya.

Exxon spokesman Maman Budiman said that interested parties were invited to submit bids before Nov. 16.

Also, Kardaya said that the country's largest and second largest privately controlled oil and gas company, PT Medco Energi Internasional and PT Energi Mega Persada, as well as state firm PT Pertamina, had submitted bids to swap concessions for the other 50 percent of Block A owned by ConocoPhillips.

"ConocoPhillips wants to invest here still, so it has asked for a block swap," said Kardaya.

Block A in Aceh is estimated to contain up to 500 billion cubic feet (bcf) of gas reserves. The gas contains a high level of carbon dioxide, which makes exploitation more expensive.

ConocoPhillips, the block's operator, has reportedly stalled development as it wants a higher share than the 48 percent offered by the government.

The development of the block is seen as crucial to securing supply for the province's Pupuk Iskandar Muda (PIM) fertilizer plants, which have been shut down since early September due to lack of natural gas.

PIM's president director Hidayat Nyakman said separately that the company was in negotiations to determine the price for the gas.

"We will need 110 million standard cubic feet per day (mmscfd) to run our two plants," said Nyakman in a phone interview. The price will be higher than US$3 per million British thermal unit (mmBtu) but will not exceed $4.

According to Nyakman, the reserves in Block A would secure supply for 11 years if the firm continued to operate two plants, and 18 years if it operated only one plant.

PIM used to purchase gas from Exxon, the operator of the Arun gas field in Aceh, at $2.3 per mmBtu.

The contract expired in July.

The government tried to reschedule contracted liquefied natural gas (LNG) shipments to Asian buyers and buy LNG cargoes on the spot market to provide supplies for PIM, but failed.