Japan firms seen buying Natuna gas stake

Japan firms seen buying Natuna gas stake

TOKYO (Reuter): A Japanese consortium is expected to agree by as early as the end of this year to buy a stake in the huge Natuna gas project in the South China Sea from Indonesia's state oil firm, Pertamina, traders familiar with the deal said yesterday.

"As the terms of the deal will be based on those used when Mobil bought a 26 percent stake in the project from Pertamina several years ago, negotiations should not take much time," a trader with one of the trading houses in the Japanese consortium said.

The consortium, made up of eight trading houses and three exploration firms, was formed earlier this year to buy up to a 13 percent stake in Natuna, one of the world's largest gas fields.

Exxon Corp of the United States owns a 50 percent share in the project and Mobil Corp owns 26 percent.

Pertamina holds the remaining 24 percent stake, and is planning to sell 13 percent, or a 54 percent slice of its current stake, traders said.

Trading houses in the consortium are Mitsubishi Corp [8058.T], Mitsui & Co Ltd, Marubeni Corp, Itochu Corp, Sumitomo Corp, Nissho Iwai Corp, Tomen Corp and Kanematsu Corp.

The three exploration companies are Indonesia Petroleum Ltd, Japan Petroleum Exploration Co Ltd and Teikoku Oil Co Ltd.

State-owned Japan National Oil Corp is expected to join the consortium as well, although the timing for its inclusion is still unclear.

Following a kick-off meeting in Tokyo in late August, Pertamina and the Japanese consortium are planning to hold a second round of talks later this month or in early October in Jakarta.

The size of the stake the Japanese consortium will purchase is still unclear, as Pertamina is also talking to Thailand on a possible sale, traders said.

In May, Indonesia and Thailand signed a memorandum of understanding for natural gas sales to Thailand from the Natuna project.

After signing the memorandum, state-run Petroleum Authority of Thailand (PTT) said that PTT Exploration and Production Plc, a PTT unit, was given the option of taking at least an 11 percent equity stake in the Natuna project as part of the agreement.

"We are seeking the full 13 percent stake, but we might end up dividing that 13 percent with Thailand," a trader with a Japanese consortium member said.

Other traders, however, said Thailand may take a portion of Mobil's or Exxon's stake, which would enable Japan to secure the whole 13 percent from Pertamina.

Commercial production at the Natuna field is likely to start around 2003 or 2004, although this will depend largely on how soon the stakeholders can find enough buyers, traders said.

Natural gas field operators are usually required to secure commitments from potential buyers before actually starting the project, in order to justify the huge investments involved. Development costs for the Natuna field are estimated at $40 billion.

The field is estimated to hold 222 trillion cubic feet of gas, of which 46 trillion are commercially recoverable. Japan is the world's largest importer of liquefied natural gas (LNG), with Indonesian cargoes accounting for 40 percent of total imports.