Gas producers signs $14b in contracts
Gas producers signs $14b in contracts
Wahyoe Boediwardhana, The Jakarta Post, Nusa Dua, Bali
The country's gas producers signed on Saturday 13 sales
contracts worth U$14 billion with state-owned electricity company
PLN, Indonesia's petrochemical company Petrokimia Gresik and
Singapore's Island Power.
The country's gas industry has been shaken by loss of several
contracts in the Asia-Pacific market. These new contracts will
help revive confidence that the domestic market can absorb much
of the country's gas output.
Because gas is cheaper than oil-based fuel, the use of gas
will also allow the country's industries to cut costs.
The head of the Oil and Gas Implementing Body (BP Migas),
Rachmat Sudibyo, who witnessed the signing of the contracts in
Denpasar, Bali, said the contracts would allow PLN to save about
$10 billion in fuel costs.
"Gas is cheaper than diesel oil. So, after calculations, the
use of gas by PLN at its power plants will enable it to save
about $10 billion throughout the contract period," he said.
Over the past couple of years, PLN has been forced to use oil-
based fuel to fire its power plants due to a lack of gas
supplies. This has inflated the company's production costs, which
is one of the reasons the company must sell its power at higher
prices.
According to the contracts signed on Saturday, PLN will
receive gas supplies from a number of producers, including PT
Exspan Nusantara, Pertamina, Santos Pty. Ltd., ConocoPhillips
Grissik Ltd., Lapindo Brantas Inc., Amerada Hess, BP West Java
Ltd. and BP Muriah Ltd., for its power plants in East Kalimantan,
East Java, Central Java and South Sumatra.
Singapore's Island Power will get gas from ConocoPhilips's
fields in Sumatra, while Petrokimia will get supplies from
Amerada Hess.
A total of 1.2 billion standard cubic feet per day (BCFD) of
gas will be supplied by PLN, Island Power and Petrokimia
throughout the contract periods of between 15 years and 20 years.
Indonesia is one of the world's largest gas producing
countries, with reserves of about 174 trillion cubic feet. The
country produces 8.4 BCFD of gas.
In the past, the government preferred to export the gas, which
made Indonesia the largest gas exporter in the region for several
decades. But recent losses suffered by Indonesia in a number of
liquefied natural gas tenders have prompted the government to
look to the domestic market for gas sales.