Govt extends West Natuna gas contracts
Govt extends West Natuna gas contracts
JAKARTA (JP): The government has finally agreed to extend the
production sharing contracts awarded to the contractors grouped
in the West Natuna consortium. This will secure natural gas
supplies from the gas fields west of the Natuna Islands to
Singapore.
Minister of Mines and Energy Kuntoro Mangkusubroto extended on
Friday the contracts awarded to the consortium's members,
including Premier Oil of Britain, Conoco of the United States and
Gulf Resources of Canada, to allow them to continue developing
and exploring for further natural gas fields in the South China
Sea over the coming three decades.
Gulf's contract on the Kakap block was extended to 2028 from
2005, while Premier's contract on the Natuna A block and Conoco's
contract on the Natuna B block were extended to 2029 and 2028
from 2009 and 2018 respectively.
Kuntoro signed the contract extensions in a ceremony where
state oil and gas Pertamina also signed a deal to supply
Singapore's Sembawang Gas (SembGas) with natural gas extracted by
the contractors from their contract areas.
"The reason behind the extension of the contracts is that we
don't expect any problems of supply to occur during the contract
period," Kuntoro said on the sidelines of the ceremony.
Present at the ceremony were chairman of Singapore's Economic
Development Board Philip Yeo and Singapore's ambassador to
Indonesia Edward Lee.
Pertamina signed a preliminary gas sales agreement with
SembGas last July but the deal was delayed several times due to
the refusal of the contractors to participate in it unless their
contracts were extended.
Under the gas sales contract, Pertamina will supply SembGas
with natural gas from the West Natuna fields for 22 years from
2001 to 2023. The gas supplies could be extended for another five
years.
SembGas, a consortium comprised of Sembawang Engineering and
Construction of SembCorp Industries Ltd, Singapore's Tamasek
Holdings and Belgium's Tractebel SA, will use the gas to feed
power and petrochemicals plants.
The gas will be channeled through a 640-kilometer underwater
pipeline linking the west of the Natuna islands with Sakra island
off Singapore.
The West Natuna contractors claim they will invest US$1.5
billion to develop the gas fields and transportation facilities,
including $400 million for the pipelines.
Legislator Priyo Budi Santoso of the Golkar ruling party
earlier criticized the government for awarding contract
extensions to the West Natuna contractors under terms which were
unfavorable to the nation.
Under the new contracts, the government agreed to increase the
contractors' shares of the proceeds from the sale of gas from the
West Natuna gas fields to 35 percent from 30 percent at present.
Priyo said the government would lose $300 million in potential
earnings due to the new contractual terms.
However, Pertamina president Martiono Hadianto said the
contractors' demand for an increase in the shares of the proceeds
from the gas sales was reasonable given that they will invest a
lot of money to develop the project as well as to explore for
more gas in the area.
"The contractors will invest $44 million for further
explorations alone," Martiono said.
Sales of the West Natuna gas will reportedly generate total
revenue of $7.5 billion over 22 years, $2.4 billion of which --
or $180 million per year -- will go to the government in taxes
and profit sharing.
The gas will be the first Indonesia has exported through a
pipeline. Indonesia is currently the world's largest exporter of
liquefied natural gas (LNG). Most exports are directed toward
South Korea, Japan and Taiwan.
"I regard this as a landmark achievement for two reasons,"
"Firstly, it binds together our two nations: The Republic of
Indonesia and the Republic of Singapore, in terms of our economic
development,.. Secondly, it creates a physical link between our
two nations as there is now a permanent pipeline crossing our
common national border." (jsk)