Pertamina to construct LPG plants, eying stake in Cepu

Pertamina to construct LPG plants, eying stake in Cepu

Moch. N. Kurniawan, The Jakarta Post, Jakarta

After successive failures in two recent tenders to acquire oil
fields here, state-owned oil and gas company Pertamina is now
planning to develop two liquefied petroleum gas (LPG) plants and
to acquire a stake in the Cepu Block oil fields as part of its
expansion program, company upstream director Iin Arifin Takhyan
said.

"We still have the money. We're now concentrating our
expansion in these areas because we think they hold the most
prospects," Iin told reporters on Tuesday.

Iin said that the two LPG plants would be located at its
Prabumulih oil field in South Sumatra and at the Jabung oil field
in Jambi.

He said that the new plants would help meet growing LPG demand
in the country and overseas.

Iin said Pertamina would set up a joint venture with an
American firm to build the US$200 million Prabumulih LPG plant,
which would be 70 percent financed by foreign loans.

"We want to have a 51 percent stake in this LPG plant," he
said.

Iin said that the $350 million LPG plant in Jambi would be
developed by a consortium of five firms including Itochu, Amerada
Hess, Devon and Pertamina. He could not name the other consortium
member.

He added that part of the financing would also come from
foreign loans.

"We have approached Japanese financial institutions to provide
the loan," he said.

Iin said that Pertamina was now in negotiations with Mobil
Cepu Ltd., the operator of the Cepu Block, over the share
acquisition plan.

Mobil Cepu is an affiliate of American firm ExxonMobil. The
Cepu Block oil fields are located in Central Java and East Java.

"We expect to realize the plan this year," Iin said.

The Cepu Block, which has recoverable reserves in excess of
250 million barrels of oil, is expected to start producing oil at
about 100,000 barrels per day in 2003.

Pertamina previously failed to win bids to acquire oil fields
operated by Spanish-Argentinean firm Repsol-YPF and U.S firm
Devon Energy. The assets were acquired by Chinese firms CNOOC in
the Repsol-YPF tender and Petrochina in the Devon Energy bid.

The expansion program is part of Pertamina's plans to boost
production and revenue.

At present, Pertamina produces oil at about 98,000 barrels per
day (bpd), and plans to increase its output to 200,000 bpd in the
next couple of years.

But there has been speculation that Pertamina intentionally
allowed the Chinese firms to win the bids as part of a strategy
to obtain a contract from the Chinese government to supply LNG
(liquefied natural gas) to China's Guangdong province.

Pertamina is competing with two bidders from Australia and
Qatar to win the Guangdong LNG tender.