Govt agrees to extend BP contract

Fitri Wulandari, The Jakarta Post, Jakarta

BP Indonesia, the local unit of Anglo-American energy giant BP Plc., says the government has agreed in principle to extend its contract in managing the Kangean block, in East Java.

BP Indonesia president Bill Schrader said on Monday that the company was now waiting for official approval from the government, and details of the contract.

"What I hear is that the government has agreed in principal on the extension .... We have been (engaged) in many discussions with legislators, BP Migas (the Implementing Oil and Gas Body) and the Ministry of Energy and Mineral Resources. It's going very well," Schrader told reporters during the presentation of BP Statistical Review of World Energy 2003.

Early this year, BP requested the extension of its production-sharing contract in the Kangean Block, which expires on Nov. 13, 2010.

If the official nod from the government is given, the energy giant could search for new gas reserves in Terang Sirasun and Batur, which lie within the Kangean Block in a bid to recover its declining gas production.

It has been estimated that the gas production will continuously diminish to 100 million standard cubic feet per day (MMSCFD) in 2005 and to 20 MMSCFD in 2010 from current production levels of 180 MMSCFD, due to diminishing gas reserves in the old fields.

As of the end of 2002, BP had produced 11.74 million barrels of oil and 947 billion cubic feet of gas.

BP at present supplies gas for the East Java market along with other gas producers.

Demand for gas in East Java is currently at 424 MMSCFD but it is expected to increase up to 600 MMSCFD.

However, gas supply from producers has declined sharply to 290 MMSCFD from 390 MMSCFD previously. This is partly due to a drop in the gas reserves at the Kangean block.