Indonesia expects $1 billion in new gas contracts

JAKARTA (JP): Indonesia is expecting an annual income of more than US$1 billion from three new gas contracts with Malaysia and Singapore, according to Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

Purnomo said on Wednesday that Indonesia would sell gas to Singapore under two separate contracts with an annual value of $775 million, and to Malaysia under a third contract worth between $200 million and $300 million.

"We are finalizing negotiations with Malaysia to supply them gas from the Natuna fields," Purnomo told reporters in a press meeting.

He was referring to a recently signed head agreement between state oil and gas company Pertamina and its Malaysian counterpart Petronas.

Indonesia, he said, could reap a revenue of between $200 and $300 million a year for the supply of 325 million cubic feet per day (mmfcd) of gas over a period of 20 years.

Pertamina and its contractor, American oil and gas company Conoco, will supply the gas from the West Natuna Islands located in the South China Sea.

Conoco estimated the investment costs to be less than $1.5 billion.

Pertamina has also signed a head agreement with the Singaporean firm Gas Supply Private Limited for the supply of gas from Sumatra to Singapore.

Purnomo said that under the agreement, Indonesia would earn some $400 million a year for the supply of 350 mmfcd of gas over a period of 20 years starting from 2003.

Gas will be piped from the gas fields in Central South Sumatra, where Pertamina's three production sharing partners namely Gulf Resources Indonesia Grissik, Santa Fe Energy Resources Jabung and Gulf Indonesia Resources South Jambi are operating.

Pertamina and its contractors are expecting to invest around $1 billion for the development of this project.

In 1999, a consortium of Pertamina, Conoco, Premier Oil Natuna Sea Limited and Gulf Resources Limited signed a 22-year contract with Sembawang Gas of Singapore.

Under the contract, the consortium will supply 325 mmfcd of gas worth $375 million a year to Sembawang from the West Natuna Islands, Purnomo said.

Purnomo said he expected President Abdurrahman Wahid to inaugurate the project next month, which would mark Indonesia's first gas export through pipelines.

Furthermore, he said, Pertamina was also bidding to supply Taiwan with liquefied natural gas (LNG) from the Bontang LNG plant in East Kalimantan.

"We're currently preparing to construct a new LNG processing unit (Train I) at Bontang," he said.

Bontang has the country's largest LNG plant with a production capacity of 27.2 million tons a year. Train I, if completed, would become the plant's ninth LNG train.

Purnomo further said that the government planned to offer incentives for domestic gas sales to various industries next year.

"We hope to lower the gas prices, especially for the transportation sector," he said, adding that it was to promote the development and usage of gas fueled vehicles.

However, he did not elaborate by how much the government planned to lower gas prices in the various industries.

According to him, prices of gas will be lowered for the financially strapped state electricity company PT PLN.

PLN has long complained about the high gas prices it pays compared to other strategic industries such as the fertilizer industry.(bkm)