Petronas eyes Natuna D-Alpha gas project
Petronas eyes Natuna D-Alpha gas project
JAKARTA (JP): Uncertainty over the development of the Natuna
D-Alpha gas project may soon end, with Malaysian state oil and
gas company Petronas reportedly eying gas supplies from the gas
field in the South China Sea.
Indonesian state oil and gas company Pertamina's director for
production sharing contracts, Iin Arifin Takhyan, said on Tuesday
the state company was now in discussions with Petronas over a
contract for gas from the Natuna D-Alpha block.
"They (Petronas) have approached us and we had an informal
discussion," he said.
Petronas and Pertamina, he said, were now discussing a follow-
up to the meeting, though he added that Petronas was in no hurry
to close a deal because it would not need the Natuna gas before
2010.
The Natuna D-Alpha project, located east of Natuna island, is
also known as the East Natuna project to differentiate it from
the gas projects west of Natuna island owned by American oil and
gas company Conoco Inc., British firm Premier Oil and Canadian
firm Gulf Indonesia Resources.
The D-Alpha block is 74 percent owned by ExxonMobil Oil
Indonesia Inc., the subsidiary of American company ExxonMobil
Corp. Pertamina holds the remaining 26 percent of the block.
The project has long been delayed because Pertamina has been
unable to find a market for the block's gas reserves.
Iin said East Natuna's gas field was estimated to hold total
reserves of 140 trillion cubic feet (tcf), though some 72 percent
of the reserves contain carbon dioxide.
"Without the carbon dioxide the gas reserves should be around
45 tcf, which is still huge," he said.
He said the high carbon dioxide content made the development
of the field expensive. "We cannot dump the carbon dioxide so we
have to reinject it, which is why it's so costly."
The huge development cost, estimated at US$40 billion, calls
for a market capable of generating an adequate return.
Pertamina's decision to shelve the project was mainly due to the
absence a buyer. "It was just a matter of economical
feasibility," Iin said.
He said because of the high investment costs, the government
had given the owners of the D-Alpha block the right to retain 40
percent of the block's future gas output
Under standard production sharing contracts, contractors keep
30 percent of gas output, with the remaining 70 percent going to
the government.
Iin said demand for gas in Malaysia was huge, but it was too
early to estimate how much gas Petronas wanted to buy from Natuna
D-Alpha.
When questioned about what price Pertamina would offer for the
gas, Arifin said it depended on the quantity of gas Petronas
intended to buy.
He said Petronas had asked for the price of gas from the block
be pegged to the market price of high sulfur fuel oil.
Pertamina, for its part, wants to secure a long-term contract
with Petronas that runs at least 20 years, he said.
He added that the contract would include a ceiling and a floor
price for the gas. "It is normal in a contract to protect the
interests of the buyers and the sellers," he explained.
At present, he said, Petronas was focusing on negotiations to
sell the gas from the West Natuna gas fields operated by British-
based Premier Oil.
Petronas and Pertamina signed a sale and purchase contract in
late March allowing Pertamina's production sharing contractor,
Conoco Inc. of the United States, to supply gas from West Natuna
to Malaysia.
Under the deal, Petronas will purchase up to 250 million
standard cubic feet per day of natural gas for 20 years starting
from July next year. (bkm)