Sat, 10 Jul 2004

Govt signs new gas contracts

Indra Harsaputra, Surabaya

The government signed US$4.3 billion worth of liquefied natural gas (LNG) sales agreements with several international and local oil and gas companies on Friday.

The Upstream Oil and Gas Implementing Body (BP Migas) said that the agreements covered the sales of 1.7 trillion cubic feet of natural gas.

State-owned gas distribution company PT Perusahaan Gas Negara (PGN) is set to buy gas from ConocoPhilips and PT Medco Energi Internasional to meet demands in West Java and Batam.

BP Plc. will sell gas to local fertilizer company PT Pupuk Kujang, while Amerada Hess extended a gas sales contract with chemical company PT Petrokimia Gresik.

With the signing of these contracts, BP Migas claimed that it had managed to coordinate a total of 35 gas sales contracts domestically within the last two years, with a total volume of 8.4 trillion cubic feet, valued at $22 billion.

Also on Friday, the government signed three Memorandum of Understanding (MOU) agreements on LNG sales with three Chinese companies: First China Petroleum, Sino-Cher, and China Chemical Corp.

BP Migas chief Rachmat Sudibyo said that each company would buy between 1 trillion to 3 trillion cubic feet of gas. No further details were provided.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that Indonesia had yet to manage its 140 trillion cubic feet of gas reserves.

"We've just managed around 80 trillion cubic feet of natural gas. The government will put in its best effort to boost investment in the oil and gas sector," he said.

Indonesia is trying to increase its gas sales to China as BP Plc.'s contract with China's Fujian province -- to sell 2.6 million metric tons of LNG per year from 2007 for 15 years -- is considered not economical enough to support the development of BP's Tangguh project in the West Papua province, analysts have said.

Being the world's sixth largest natural gas producer, Indonesia is also aiming to sell its LNG to new markets, including the United States West Coast and Mexico.