Natuna D-Alpha project to be reevaluated

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)