PGN seeks gas deal with Amerada

PGN seeks gas deal with Amerada

Leony Aurora, The Jakarta Post, Jakarta

State gas distributor PT Perusahaan Gas Negara (PGN) is in talks
with Amerada Hess to purchase gas from the Ujung Pangkah block in
East Java to supply small and medium enterprises (SMEs) in the
province, a company official says.

PGN would buy about 100 million standard cubic feet per day
(mmscfd), said the company's development director, Adil Abas
Reksoatmodjo, on the sidelines of a gas sales agreement (GSA)
signing ceremony between PGN and Santos on Tuesday.

"The difference (between the use of oil and gas) is about
US$3," said Abas, explaining why there is significant gas demand
from SMEs in East Java.

According to PGN, current gas demand in the province stands at
some 250 mmscfd, which is expected to rise to 400 mmscfd in 2015.

Meanwhile, after two years of negotiations, PGN signed a GSA
on Tuesday with Santos (Madura Offshore) Pty Ltd and PC (Madura)
Ltd worth a total of some $800 million over 12 years.

Santos (Madura Offshore), a local unit of Australia's largest
natural gas producer, Santos Ltd, will provide between 100 mmscfd
and 110 mmscfd of gas from Maleo field in East Java starting in
the third quarter of next year.

"The price from Santos is $2.415 (per million metric British
thermal unit, or mmbtu)," PGN's president director, W.M.P.
Simanjuntak, said.

"We have to pay another 17 US cents (per mmbtu) to Pertamina,"
he said, because PGN will use Pertamina's pipeline to transport
the gas from the mouth of the field to prospective consumers.

"We will sell the gas at between $3.80 and $3.90 per mmbtu,"
said Simanjuntak.

He said the gas would help consumers save approximately $1.2
billion during the agreement period from the price difference
between oil and gas.

Amid soaring global oil prices and a continued downward trend
in oil output in the country, the government is promoting the
utilization of other energy sources to replace heavily subsidized
fuel.

Under a blueprint draw up by the Ministry of Energy and
Mineral Resources, oil usage to produce energy, which at present
stands at up to 55 percent, will be reduced to between 10 percent
and 15 percent by 2020.

Gas usage to yield power is targeted to rise from 31 percent
this year to 39 percent in 2020, and coal from 11 percent to 38
percent.

Earlier this month, PGN signed a memorandum of understanding
with the Joint Operating Body Pertamina Amerada Hess, which
operates the Jambi Merang field in South Sumatra.