Gas sales to Singapore
Following media reports of the sale of gas to Singapore, a subject on which Mr. Budi Santoso, a member of the House of Representatives, commented, allow me to congratulate the Indonesian government and the three contractors (PSCs) for their success in selling gas to Singapore.
This sale is indeed a blessing to us considering that it took over a decade before Singapore's government finally decided to buy gas from us. In fact, Singapore could have opted to purchase gas from Thailand or Malaysia, which would be cheaper because establishing an overland gas pipeline would be less costly than building one offshore. It is more complex to develop this gas field than an oil one, especially considering that the gas field is located in the Natuna Sea and that building a 470-km pipeline will be very costly. In fact, to develop a natural gas field, a contractor must meet four criteria, one of which is to provide a guarantee that there will be buyers for a minimum of 15 to 20 years.
With the development of a gas field in the area of the Natuna Sea, Indonesia will not only earn about US$123 million but it will also enjoy the transfer of advanced offshore engineering technology, regional economic and community development, as well as increased national security in the area around Natuna Sea. Amid the international competition in the natural resources industry, we should thank God for all these benefits we will receive.
As for the high investment put up by the contractors and the large percentage of profit they enjoy, I believe that it is quite fair considering that as an operator, a contractor has to put up its investment first and bear the high risk that it will not be able to reap any profits until at least after a decade of operations.
About the allegation that this undertaking will leave a burden of debt to the next generation, as stated by Mr. Budi Santoso, I think that this allegation is both incorrect and unfounded because the foreign exchange receipts generated from the sale of the gas can be used to pay PSC loans (the principle of a PSC is that it bears the exploration risks and provides financial and technical expertise for the operations), while also guaranteeing that the gas deposit may supply gas for over 22 years. One of the principles of a hydrocarbon economy is that it never inflicts losses to the people or the state. There has never been any country which has been disadvantaged by the presence of gas fields.
As for direct appointments for exploration, production and the construction of pipe transmission facilities, it is only natural that the PSCs, as the operators, be authorized to make direct appointments, although the PSCs, following general practices, will select only highly qualified companies through a tight selection process in which the standard operating procedures from the American Petroleum Institute are applied. What matters is that Indonesian companies play a bigger role in this undertaking and that the PSCs resort to direct appointment solely to save the subsurface assets they have invested. I believe what should cause concern is the environmental impact of this undertaking, particularly with respect to the management of carbon dioxide emissions. To go back to what Mr. Budi Santoso said, I am inclined to think that the matter has been exaggerated all out of proportion.
DIRGO D. PURBO
Jakarta