Natuna deal signing next week: Abda'oe

Natuna deal signing next week: Abda'oe

JAKARTA (JP): The Indonesian government, indicating that it
will soon start developing the biggest project ever in the
country's history, said yesterday that it will sign an agreement
with Exxon Corp. of the United States next week for gas
liquefaction in Natuna.

Faisal Abda'oe, the president of the state oil company
Pertamina, told reporters here that the agreement on the US$35
billion project will be signed next Monday.

He declined to elaborate on the deal or on the production
and profit sharing arrangements.

He said, however, that Exxon and Pertamina would divide the
investment capital required for the development of the natural
gas project on a 50-50 basis.

The Natuna deal has been in limbo for two years due to
conflicting opinions over profit sharing, government guarantees
and taxes.

Earlier news report said that Exxon needed special tax
incentives to make the project feasible.

Indonesia has passed new tax laws, made effective this
month, that warrant certain benefits for the project.

One of the new laws stipulates that foreign investments in
frontier areas are eligible for tax privileges, including the
right to carry forward losses for up to 10 years and the
reduction of the 20 percent withholding tax on after-tax profits
of permanent establishments in Indonesia.

On the tax issue, Abda'oe commented yesterday: "Actually,
the negotiations had been completed in November but the results
were still subject to the new tax law which became effective this
month."

Preparations on the agreement were signed here on Nov. 10
with U.S. Commerce Secretary Ron Brown, Indonesian State Minister
for Research and Technology B.J. Habibie and 10 other Indonesian
ministers witnessing.

The project is located about 1,110 kilometers north of here
and about 600 kilometers northeast of Singapore. The seabed
around the Natuna island is estimated to have 210 trillion cubic
feet of gas reserves.

Early studies of the project estimate that out of the
reserves, about 38 million tons of liquefied natural gas can be
produced annually for about 20 years.

Participation

Abda'oe also said yesterday that Pertamina was seeking to
release part of its stake in the historic deal. "We do not want
to retain all of the 50 percent. We want others to participate,"
he said.

The executive cited that several producers, buyers and
financiers had already expressed interests, but he said that any
decision will have to wait for the signing.

Studies of the project expect that 18 offshore platforms
will be constructed to treat the more than 10 billion cubic feet
of gas each day.

The studies also estimate that the offshore facilities will
include 70,000 tons of structural steel, 910 kilometers of
pipelines and 2.6 million horsepower of turbo machinery.

Even without Natuna, Indonesia -- with an annual production
capacity of over 23 million tons -- is the biggest producer of
liquefied natural gas (LNG) in the world. All of the LNG is
exported to Japan, Taiwan and South Korea.(hdj)