Military so shield Natuna gas

JAKARTA (JP): Indonesian Armed Forces Commander General Feisal Tanjung said yesterday the military was ready to secure the exploitation of the huge gas reserves in the Natuna islands in the South China Sea.

"There is nothing to worry about. We have made preparations to safeguard the project," Feisal said.

He said the military had beefed up facilities at two airports -- Simpang Tiga airport in Pekanbaru, Riau, and Subadio airport in Pontianak, West Kalimantan -- to turn them into military bases to protect the Natuna islands.

"Hawk fighters from Britain will be stationed at the Pekanbaru airbase soon. We bought them especially to secure the project," he said.

Minister of Research and Technology B.J. Habibie and Esso Exploration & Production Natuna Inc. president A.N. Crownover were with Feisal when he made the statement.

Indonesia has bought 24 Hawk-100 and Hawk-200 fighters from British Aerospace. Some arrived last year and have been operated by the Air Force.

In the past China was seen as a potential threat to the Natuna islands because it issued a map which claimed the waters around the islands as part of its territory. It has since said the islands belong to Indonesia.

Analysts said another potential threat to the project's security could come from conflict over the adjacent, potentially oil rich Spratly Islands which are claimed wholly or partly by China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei.

Indonesia's military held a 12-day exercise on and around the Natuna islands last year. The exercise involved 19,000 personnel from all Armed Forces branches and dozens of aircraft and warships.

The project is expected to become Indonesia's largest gas field. Official estimates for the field are 222 trillion cubic feet of natural gas but only 75 percent of the gas is recoverable because of its high carbon dioxide content.

Indonesia is the world's largest producer of liquefied natural gas with 22.2 million tons a year. The gas comes from two gas fields in Arun, Aceh and in Bontang, East Kalimantan, where two gas liquefaction plants have operated since the late 1970s.

Stake

Habibie, chairman of the Natuna project team, said the Petroleum Authority of Thailand (PTT) was competing with a Japanese consortium for a stake in the project.

PTT is negotiating with state oil and gas firm Pertamina on a pipeline project to pipe gas from the Natuna islands to Thailand and wants to buy up to 15 percent of the project from Pertamina.

Pertamina has a 24 percent stake in the project but plans to reduce its share to 11 percent.

Earlier it offered 13 percent of its stake to a consortium of 13 Japanese companies. But the consortium has yet to agree on the distribution of shares among its members.

The consortium includes four oil companies and nine trading houses including Japan National Oil Co, Mitsubishi Corp, Mitsui & Co Ltd and Nissho Iwai Corp.

"We have decided first buy, first get," Habibie said.

The project was initially owned equally by Pertamina and Esso Exploration and Production Natuna Inc., an affiliate of U.S. firm Exxon Corporation.

Pertamina later reduced its stake to 24 percent selling 26 percent to U.S. firm Mobil Oil which operates the Arun gas field.

Esso and Mobil Oil were not willing to reduce their interests because they expect the project to be lucrative, while Pertamina would not reduce its stake to less than 11 percent so it maintains a veto right in the project, Habibie said.

Indonesian law gives owners of 11 percent or more in a project a veto right in matters related to operation and management.

The field will start producing five million tons of gas a year in 2002 and its capacity will gradually increase to 15 million tons.

Exxon has spent US$250 million on development research and another $100 million this year. The project needs $20 billion to reach its target annual capacity of 15 million tons. (jsk)