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.