Pertamina, Esso to sign deal on LNG projects
JAKARTA (JP): The state oil company Pertamina and Esso Natuna Inc., an affiliate of the U.S. Exxon Corp., are expected to sign an agreement on a US$34 billion natural gas liquefaction project in the Natuna Sea by the end of this year.
"We are in the final negotiations with Esso to develop the gas liquefaction project in Natuna, hoping that the deal will be signed soon after the clarification of some items in the planned agreement later this year," Pertamina's president Faisal Abda'oe told Commission VI of the House of Representatives (DPR) in a hearing here yesterday.
State Minister of Research and Technology B.J. Habibie, who is also a supervisor of the Natuna project, assured early this month that the Pertamina-Esso deal will be signed in November.
There are still some differences on the 52-item Basic Agreement for the long-term Natuna project emerging between the two parties, said Abda'oe, who is also chairman of the project's negotiating team.
He did not elaborate on the points of disagreement, but a member of the commission, Iskandar Mandji, said that exclusive protection from the government asked by Esso, the tax tariff, as well as Esso's royalty to Pertamina, remained sticking points.
Abda'oe explained that the negotiations with Esso consumed a great deal of time because the project is very complex and complicated.
Content
Abda'oe reminded his listeners that the gas output from the Natuna field has a high level of carbon dioxide content, amounting to 71 percent. The content may cause a serious pollution problem, once it is thrown into the sea.
"As an alternative, the carbon dioxide form the Natuna field should be injected back into the earth, he said.
Esso has reportedly invested some $16 billion for the initial development of the gas field in the Natuna bloc, billed to be the largest concentration of gas reserves in the world.
Platforms
The natural gas project will have six treating platforms, six drilling platforms (each with 36 wells), two living quarters platforms and four injection platforms.
The treating platforms are expected to be capable of the bulk extraction of carbon dioxide.
The Natuna field, operated by Esso under a production sharing contract with Pertamina since 1980, is located about 1,100 kilometers north of Jakarta and 600 kilometers northeast of Singapore at 145 meters depth.
Both parties have agreed to hold a 50-percent share in the gas liquefaction project, Abda'oe said.
"Regardless of the disagreement, we expect that the Natuna project will start its initial commercial operations by 2004," Abda'oe said, adding that the construction of the project will take eight years.
He said he expected the construction to start as soon as the agreement is signed.
Upon project completion, the Natuna field will produce up to 14 million tons of liquefied natural gas (LNG) per year, he said.
In comparison, the LNG plants in Arun, North Sumatra, and in Bontang, East Kalimantan, are capable of producing 25 million tons of LNG per year.
An Esso survey showed that gas deposits in Natuna reach some 45 trillion cubic feet.
"We expect that the production of the Natural field will anticipate the increasing demand for energy in the country," he said, cautioning that Indonesia will likely become a net oil importer in the early 2000s.
Director general of Oil and Gas Suyitno Patmosukismo said yesterday that Indonesia will become a net oil importer within the next 10 years, considering that the oil demand in the country is rapidly increasing, while its oil reserves are being depleted. (fhp)