Indonesia, KL to sign $8.5b gas pact

Indonesia, KL to sign $8.5b gas pact

JAKARTA (Agencies): Indonesia and Malaysia will sign a comprehensive agreement in Jakarta Wednesday on US$8.5 billion worth of natural gas sales, Energy and Mineral Resources Minister Purnomo Yusgiantoro said Tuesday.

The agreement will follow an initial agreement signed in January.

Malaysia's Minister of Energy, Communications and Multimedia Leo Moggie will witness the signing of the agreement. Purnomo said.

Indonesia's state-owned oil and gas company Pertamina will begin delivering gas to Malaysia starting mid-2002, Dow Jones reported Tuesday.

The gas, from the West Natuna Sea area, will be channeled to the offshore facilities of Malaysia's Petronas Gas Bhd in the eastern state of Terengganu.

Malaysia is expected to take about 250 million cubic feet a day of gas from Pertamina over a period of 20 years.

In Kuala Lumpur, Malaysian national oil firm Petronas said that the plan to buy the natural gas from Indonesia over 20 years was a commercial decision and not designed as aid for Jakarta.

Petroliam Nasional Bhd's unit, Petronas Gas Bhd., in January made an agreement in principle to buy natural gas from Indonesia's Pertamina, the Sun newspaper said Tuesday.

"The proposed purchase is a viable and transparent business transaction between two state-owned oil companies," a Petronas spokesman was quoted as saying.

A comprehensive gas sales agreement is expected to be signed by the end of the month, with initial gas delivery to commence by mid-2002. The gas from Indonesia's West Natuna Sea area will be transported to Petronas' offshore facilities in the eastern state of Terengganu.

Analysts were quoted as saying that it was strange that Malaysia, the world's third largest exporter of liquefied natural gas, should be buying from Indonesia.

They said the deal could be an aid arrangement between the two governments following a recent plans by Indonesia to pledge some of its natural gas reserves as asset-backed security to raise fresh loans.

But the Petronas spokesman said the company's intention was to secure an additional supply of gas at a competitive price to cater for projected demand in Malaysia.

This would result in cost savings and prolong Petronas' gas reserves over the long-term, he said.

The deal would also open up avenues for further bilateral cooperation in the petroleum sector, and was an important step towards realizing the Trans-ASEAN Gas Pipeline network to link ASEAN countries' gas infrastructure for the region's energy needs, he added.

Malaysia has gas reserves of 84 trillion standard cubic feet which will last 35 to 40 years, the newspaper said.

Malaysia is part of the Association of Southeast Asian Nations (ASEAN), along with Brunei, Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, Thailand and Vietnam.