Negotiation on $34b gas liquefaction in Natuna finalized

JAKARTA (JP): State Minister of Research and Technology B.J. Habibie said yesterday the government has finalized lengthy negotiations with Esso Natuna Inc. of the United States on a US$34 billion natural gas liquefaction project in Natuna.

"There are no discrepancies between the two parties, the deal is ready to sign," Habibie told reporters after meeting with President Soeharto at the President's residence yesterday.

"Our last meeting with Esso Natuna's executives and lawyers on Thursday showed both parties have successfully negotiated all key issues," he said.

Minister of Mines and Energy I.B. Sudjana said recently that the hard issues which made for lengthy negotiations, include the concerns over royalties to be paid by Esso Natuna to the state oil and gas company Pertamina, taxation, environment and local contents.

Habibie said negotiations on all key issues have now been completed. "We are now discussing plans to realize the project," he said.

He did not elaborate concerning royalties and tax tariffs to be imposed on Esso Natuna, an affiliate of the U.S. company Exxon.

Sudjana, at the inauguration of the new headquarters of the state electricity company PT PLN on Thursday, declined to comment to reporters on the planned royalties and taxation.

"It is impolite to announce the results of the negotiations until they are reported to President Soeharto," Sudjana told The Jakarta Post.

Habibie and Sudjana expressed optimism that the deal for the natural gas liquefaction project in the Natuna Sea, 1,110 kilometers north of here and 600 kilometers northeast of Singapore, will be signed during the official visit of U.S. President Bill Clinton for the second informal summit of the Asia Pacific Economic Cooperation in Bogor next month.

January

AFP wire service reported that Pertamina's President Faisal Abda'oe said, at the opening of the Association of Southeast Asian Nations oil committee conference in Manila yesterday, the agreement on the project is likely to be signed in January, next year.

The memorandum, to be signed while Clinton is in Indonesia attending the summit, will be a preliminary to the signing of the contract agreement, Abda'oe said.

Once the project is complete, it will be the largest concentration of gas reserves in the world, capable of producing up to 14 million tons of liquefied natural gas per year.

The project, 50 percent owned by Esso and 50 percent by Pertamina, will have six treatment platforms, six drilling platforms (each with 36 wells), two living-quarters platforms and four injection platforms.

An earlier report said Esso has invested US$16 billion for the initial development of the gas field in the Natuna bloc since its first operation in 1980.

Pertamina has produced 25 million tons of liquefied natural gas per annum so far from its plants in Arun, northern Sumatra and in Bontang, East Kalimantan. All of the gas output is exported to Japan, Taiwan and South Korea. (fhp)