Indonesia-Singapore to sign gas sales agreement today
Indonesia-Singapore to sign gas sales agreement today
JAKARTA (JP): State oil and gas company Pertamina has said it
will on Friday (today) sign a contract to supply Singapore's
Sembawang Gas (SembGas) with natural gas from the West Natuna gas
fields through a 640-kilometer underwater pipeline.
The ceremony to sign the contract has been delayed several
times, but Pertamina spokesman Ramli Djaafar said in a statement
released on Thursday that it would finally take place at the
Ministry of Mines and Energy at 10 a.m. on Friday.
Industry sources also said that Minister of Mines and Energy
Kuntoro Mangkusubroto would renew the production sharing
contracts (PSC) held by three contractors grouped in the West
Natuna consortium. The three contractors are Premier Oil of
Britain, Conoco of the United States and Gulf Resources of
Canada.
Pertamina and SembGas signed a memorandum of understanding
over gas from the West Natuna fields last July, but there have
since been a number of delays to signing the contract.
One source of delay was the refusal of Pertamina's production
sharing contractors to participate in the deal unless the
government extended their right to exploit the gas fields in the
South China Sea.
Under the gas sales contract, Pertamina will supply SembGas
with natural gas from the West Natuna fields for 22 years from
2001 to 2023.
However, Gulf's contract in the Kakap block expires in 2005,
while Premier's contract in the A block and Conoco's contract in
the B block end in 2009 and 2018 respectively.
The contractors have asked the government to extend their
contracts to cover the whole period of gas sales so that they can
earn an acceptable return on investments they have made in the
giant project.
The contractors claim they will invest US$1.5 billion to
develop the gas fields and transportation facilities, including a
640 kilometer undersea pipeline costing $400 million to ship gas
from West Natuna to the island of Jurong off Singapore.
SembGas will use the gas to feed power and petrochemicals
plants.
Sale 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.
Delay
Meanwhile on Thursday, legislator Priyo Budi Santoso of the
ruling Golkar called on the government to review its decision to
extend the contracts awarded to Premier, Gulf and Conoco.
He said the extension demanded by the three contractors would
cut the government's earnings from sale of the gas.
"I am not against extending the contracts, but the contractors
have made use of the current economic crisis and the country's
dire need of investment to force the government into accepting
unfavorable terms," Priyo said.
Priyo said that Premier, Conoco and Gulf had asked the
government to cut its share of proceeds from the sale of gas from
the West Natuna fields to 65 percent in the new contracts from 70
percent at present.
The contractors also asked the government to increase their
investment credit to 55 percent in the new contracts from 17
percent at present. Under the new investment credit scheme, the
government will have to reimburse contractors by almost twice as
much more than at present for exploration activities.
Priyo estimated that the government would lose $300 million in
potential earnings due to the new contractual terms.
"The new contractual terms will force us to accept a loss. The
government should delay extending the contracts if the
contractors refuse to change the terms. Otherwise, I'll never
stop criticizing this project," Priyo swore. (jsk)