Pertamina wins approval to sell LNG to India

Pertamina wins approval to sell LNG to India

JAKARTA (JP): State oil and gas company Pertamina said on
Wednesday that it won approval from India to sell its natural
liquefied gas (LNG) to the country.

"We plan to sign a memorandum of understanding on the sale
tomorrow (Thursday). They (India) may want to buy our LNG and
would also like to invest in certain projects in Indonesia,"
Pertamina president Baihaki Hakim announced following his
presentation at the Indonesian International Energy Conference
2000.

He said under the agreement, the Indian Oil Company (IOC) has
agreed to buy 1.8 million tons of LNG from Pertamina and that the
gas would be supplied by Badak NGl Co., which operates seven LNG
trains, each with a production capacity of about three million
tons of gas.

Pertamina plans to operate an eighth train to meet the
estimated increase in LNG demands abroad.

Pertamina jointly operates the Badak plant, also called the
Bontang LNG plant, with its production-sharing partners Unocal
Indonesia, Vico Indonesia Ltd. and Total Indonesie.

Baihaki said Pertamina was ready to supply India with "any
amount they want" although the upcoming agreement calls for
supplying the country with 1.8 million tons of LNG.

As for the planned investments in Indonesia's oil and gas
industry, he said several investors from the Middle East might
join the plan.

Baihaki also confirmed talks, saying that Indonesia would
supply Malaysia with gas from the West Natuna gas fields.

"We are still in talks over the pricing," he added without
further elaborating on the project.

The West Natuna gas fields, located in the Southeast China
Sea, are being jointly developed by Pertamina and a consortium of
contractors led by Conoco Indonesia Inc. of the United States.

The project has secured a 22-year contract to supply gas to
Singapore beginning July 2001.

The government is also actively marketing LNG from the Tangguh
LNG project, located in Irian Jaya, which Pertamina expects to
start operating by 2005.

The government said it would participate in a tender to supply
China with three million tons of LNG per year from the Tangguh
LNG plant.

Baihaki said during his presentation that Indonesia was the
world's largest LNG exporter, with exports totaling 26.35 million
tons of gas in 1998.

He said Indonesia's main international markets for LNG were
Japan, South Korea and Taiwan.

Difficult

However, chairman of the Indonesian Petroleum Association
William T. Fanagan said Indonesia had difficulties developing its
vast reserve of natural gas, due to a lack of markets and an
unworkable gas policy.

Fanagan said during 1994 to 1999, Indonesia's commercial oil
and gas reserves rose by five billion barrels of oil, of which 80
percent was natural gas.

But to attract investment for the development of these
reserves, the government must design a gas policy that would
promote the domestic widespread use of gas, he said during the
presentation at the conference.

He said a workable gas policy would further reduce the use of
subsidized fuels and expand exploration and new field
developments.

But if the domestic market's potential remained untapped, the
government should boost efforts to penetrate gas markets abroad,
he suggested.

President of state-owned gas distribution company PT PGN Qoyum
Tjandranegara also urged the implementation of a new gas policy,
including the offering of incentives to develop gas supplies in
all areas of the economy.

Speaking at the conference, Qoyum said the widespread use of
gas was dependent on the development of a more extensive and
integrated gas pipeline infrastructure.

He said the present gas transmission line, which he called
"piecemeal development" would dictate the marketability of the
gas.

A comprehensive plan of an integrated gas pipeline would,
among other things, link scattered gas resources and the market,
absorb small and marginal gas fields near the pipelines and lower
gas transportation costs.

He said Indonesia's potential gas reserves totaled 160.8
trillion cubic feet (tcf), the largest of which were the Natuna
gas fields with 49.7 tcf and the Badak gas fields in Bontang with
46.2 tcf.(bkm)