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)