Thu, 30 Jun 2011

From: The Jakarta Globe

By From: The Jakarta Globe
ByRirin Radiawati Kusuma

In a bid to boost output, the Indonesian government has invited Japanese investors to develop small gas fields in the eastern part of the Southeast Asian nation.

The Japan Bank for International Cooperation would help with financing for investors who want to work on those fields, said Raden Priyono, chairman of upstream oil and gas regulator BPMigas.

Small gas fields, or marginal fields, are usually ignored by gas companies because of concerns about the cost of extracting the gas from remote sites such as those in East Indonesia.

“We have confidence that JBIC, with its long investment experience in Indonesia, will be able to play an important role in convincing Japanese big investors to develop the Indonesian up-stream oil and gas industry’s huge potential in the form of financing,” Priyono said on Tuesday.

He said two Japanese companies, Mitsui and Sumitomo, would handle the pilot project.

Mitsui, an energy and infrastructure company, is expected to develop marine compressed natural gas for delivery to other islands in Indonesia.

Sumitomo, a power plant builder, plans to extract gas and directly deliver it to plants near the mining sites. It also plans to build a small floating storage regasification unit, Priyono said.

The cost of the projects will be revealed after the completion of feasibility studies.

Under the agreement, the gas produced from the fields will not be for overseas sale, Priyono said.

“This is a new model where the foreign companies produce gas purely for domestic needs,” he said.

According to data from the Forum for Gas-Using Industries (FIPGB), local industries need 800 million standard cubic feet per day of gas, but the current supply only meets half of that demand.

Approximately 40 production-sharing contracts involve small gas fields, Priyono said. About 40 trillion cubic feet of gas reserves could be extracted, mostly in Sumatra, Kalimantan and Java.

Nobuyuki Higashi, the head of JBIC’s Asia and Oceania finance department, pointed to JBIC’s experience in financing the development of the Arun, Bontang and Tangguh LNG plants.

“This memorandum of understanding integrates upstream gas business, transport and gas fired power plants,” Higashi said, adding that Sumitomo and Mitsui were pioneer investors, paving the way for others in Japan.

“There will be many more Japan companies coming to Indonesia to invest in the gas sector,” he said. “Under this framework, the undeveloped small and medium-sized gas fields in Indonesia will meet their total capacity.”

Priagung Rakhmanto, an energy analyst from Reforminer Institute, said the government should ensure the supply of gas by local industries.

“Those gas fields should benefit local companies, the domestic economy,’’ Priagung said.