Pertamina to supply natural gas to ammonia plant in East Kalimantan
Pertamina to supply natural gas to ammonia plant in East Kalimantan
JAKARTA (JP): State oil and gas company Pertamina signed on
Wednesday a 20-year contract to supply natural gas to a large
ammonia plant, which is partly controlled by Mitsubishi Corp of
Japan, in East Kalimantan.
Under the deal with PT Kaltim Parna Industri, Pertamina will
supply 55 million cubic feet per day of natural gas as feedstock
for the ammonia plant in the industrial town of Bontang.
The US$240-million plant, with an annual production capacity
of 500,000 tons, is currently under construction at the Pupuk
Kaltim Industrial Estate and expected to begin commercial
production in 2002.
The gas will come from nearby fields operated by Total
Indonesie of France, Virginia Indonesia Co. of the United States
and UNOCAL Corp of the United States under production-sharing
contracts with Pertamina.
"This is one of the concrete measures carried out by Pertamina
to increase the usage of natural gas for industrial feedstock,"
Pertamina president Martiono Hadianto said during the contract-
signing ceremony.
Although Indonesia has become the world's leading gas producer
and exporter, natural gas utilization by local industries was
below optimum levels, Martiono said.
Kaltim Parna Industri is a joint venture involving Mitsubishi
Corporation, with 55 percent of the equity, Asahi Chemical
Industri Co. Ltd. of Japan, with 10 percent and PT. Parna Raya of
Indonesia, with 25 percent. The remaining 10 percent is held by
the foundation which runs the pension fund for employees of PT.
Pupuk Kalimantan Timur, a state-owned fertilizer company with a
major operation in Bontang.
"This gas contract is indeed a very important foundation of
our long-prepared ammonia project," Naohiko Munakata, president
of PT Kaltim Parna Industri, said at the signing.
Kaltim Parna Industri had earlier said that at least 75
percent of the ammonia would be exported to Japan, Thailand, the
Philippines, China and other Asian countries, and the remaining
25 percent would supply the local market.
Wednesday's agreement came more than two years after the
company signed a memorandum of understanding with Pertamina and
the production-sharing contractors on May 30, 1997.
The financial crisis prolonged the discussion as the parties
haggled over how to price the gas. They eventually agreed on a
market-oriented price formula linked to the prices of Indonesian
crude oil and ammonia.
"The negotiation was a little tough and time consuming for
everybody involved, but we could end all this with a big and nice
reward," Munakata said.
Pertamina is expected to sign a separate agreement with the
three contractors on the supply of gas from their fields.(02)