Govt agrees to extend BP contract

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.