Tue, 22 Aug 2000

Natuna D-Alpha project to be reevaluated

JAKARTA (JP): The government along with state oil and gas company Pertamina will reevaluate the Natuna D-Alpha project, which has been delayed for several years due to lack of funds, Pertamina president Baihaki Hakim said on Monday.

Baihaki said that President Abdurrahman Wahid had requested a team, comprising Pertamina, the Ministry of Mines and Energy and Natuna's current project execution team, to study whether the US$40 billion project was still feasible.

"The potential is great, but we have to be realistic, as the Natuna project requires huge amounts of funding. The problem lies in marketing," Baihaki announced following a meeting with President Abdurrahman.

He said the new team would discuss the marketing prospects to determine the feasibility of the Natuna D-Alpha project, which is located east of the Natuna islands.

"The gas is there, but unfortunately what we evaluated three to four years ago differs from what our present situation tells us. That is why we need to reconsider it (the project)," he said.

He added that under the existing blueprint, the Natuna D- Alpha, project also known as the East Natuna gas project, included the development of Natuna islands as an economic center.

According to him, the new team must therefore take into account the implementation of autonomy laws next year, under which regions will receive a greater share of the proceeds from the sale of their natural resources.

Unlike other gas fields, the development of Natuna D-Alpha is directly overseen by the Agency for the Assessment and Application of Technology (BPPT), which was once led by former president B.J. Habibie.

According to Habibie, the development of the Natuna gas fields would enable the Natuna islands to rival Hong Kong as a financial center in the region.

The team, Baihaki said, would also review Pertamina's production-sharing contract with Exxon Mobil Corp., which was awarded the rights to develop the massive gas project in the islands in the early 1990s.

The project is run by a joint venture between Exxon and Pertamina, in which Exxon owns a 74 percent stake and Pertamina the remaining 24 percent.

Exxon has a 40 percent revenue share under the existing contract which expires in 2004.

Gas production-sharing contracts normally impose a revenue split of 70 percent for the government and 30 percent for the contractor.

Baihaki said there were several options open for discussion such as whether to terminate the contract, extend it or retender it.

Baihaki assured that Pertamina had no intention of revising the current revenue split of 40 percent for Exxon.

He said that Natuna's high carbon dioxide content required the government to offer contractors incentives.

Natuna is estimated to hold a total reserve of 222 trillion cubic feet, of which approximately 71 percent is carbon dioxide.

"We must provide incentives, it is already difficult to market the gas now, so we must compete and look far ahead. Natuna is a project for the future," he said. He denied media reports that claim the state oil and gas company would cancel its contract with Exxon.

The new team, he said, would also consider abolishing the Natuna project execution team, which was established to develop the gas field and the Natuna region.

He said Minister of Mines and Energy Susilo Bambang Yudhoyono had requested that the presence of the execution team be reassessed.

The current chairman of the Natuna project execution team and former president of Pertamina, Faisal Abdoe, had tendered his resignation due to health reasons, Baihaki explained.

The Natuna D-Alpha gas field is the largest undeveloped gas reserve in Southeast Asia, containing an estimated recoverable reserve of about 46 trillion cubic feet. (bkm)