Premier Oil targets Ujung Pangkah gas sale deal this year
Premier Oil targets Ujung Pangkah gas sale deal this year
JAKARTA (JP): British oil and gas company Premier Oil
Indonesia Ltd. expects to secure a contract by the end of this
year to sell over 50 million cubic feet per day (mmcfd) of gas
from its Ujung Pangkah gas field in East Java to local power
companies.
Premier president Robin Allan said that the contract would
pave the way for developing the company's Ujung Pangkah gas
field, located north of Surabaya.
"We would like to sign a gas sales agreement by the end of
this year, if we can, and deliver the gas by 2004," Allan told
The Jakarta Post on the sidelines of the second meeting of the
Indonesian British oil and gas working group.
He said Ujung Pangkah's proven gas reserves were 500 billion
cubic feet, from which Premier hoped to deliver gas in excess of
50 mmcfd.
"It (gas reserves) could be double that, we haven't finished
exploring," he added.
Allan said contracts on gas sales would also be signed with
power producers in East Java, including state electricity company
PT PLN.
He refused to disclose the investment value of the Ujung
Pangkah gas project, other than to say that it would be in excess
of $100 million.
"We aren't developing until we find a buyer for our gas," he
added.
Premier, he said, is developing the Ujung Pangkah gas field
under a production-sharing contract with state oil and gas
company Pertamina.
Under the contract, the British company is entitled to a 30
percent revenue sharing, with the other 70 percent going to the
government.
Allan fell short of naming the other partners in Ujung
Pangkah. According to Premier's 1999 annual report, the company
owns a 40 percent share in the project.
Allan was upbeat a deal was within reach given the steep
growth of industrial gas consumption in the area.
A fuel subsidy slows the growth, but as the government is
phasing out subsidy spending, gas will become increasingly more
competitive, he explained.
"For me it makes sense for Indonesia to use natural gas rather
than diesel for the electricity market," he said.
Without the fuel subsidy, the price of gas is cheaper and
environmentally friendlier.
To date, industrial diesel fuel prices have been set at 50
percent of international market prices, which has effectively
closed the pricing gap between gas and other fuels.
Director general for oil and gas Rachmat Sudibyo said the
price of gas equivalent per liter is about Rp 1,100 (about 98 US
cents) compared to Rp 1,200 for industrial diesel fuel.
"If the price of diesel fuel is set at 60 percent of market
prices, certainly more will ask for gas," he explained.
According to him, before the economic crisis struck the
country, many factories began to consider using gas instead of
other fuels.
But as the crisis send the rupiah plunging, gas lost its
appeal as it was priced in US dollars.
"It's quite obvious that businessmen seek the cheapest energy
alternative," he said.
Allan went on to say that he hoped to see within the next few
months another gas sales agreement with Malaysia for his
company's Block A gas field in West Natuna.
It will be the second gas deal to be signed by state oil and
gas company Pertamina and Petronas for the supply of gas from the
West Natuna area to Malaysia.
Last March, Pertamina signed a deal with Petronas allowing
Pertamina's production sharing contractor Conoco Inc of the
United States to send a total of 1.5 trillion cubic feet of gas
its Block B field in West Natuna to Malaysia for 20 years
starting next year.
Premier also supplies gas from the same block in West Natuna
to Singapore through a consortium comprising oil and gas
companies Gulf Resources from Canada, and Conoco.
Twenty-seven percent of Premier's production working interest
is located in Indonesia, making the country its second largest
operation after the United Kingdom. (bkm)