Singapore agrees to buy natural gas from Natuna

Singapore agrees to buy natural gas from Natuna

JAKARTA (JP): State oil and gas company Pertamina and
Singapore's Sembawang Gas (SembGas) yesterday signed a massive
deal paving the way for the first international sale of natural
gas piped from the western coast of Natuna island to the city
state.

"The agreement constitutes a milestone for Indonesia's natural
gas industry because the sales will become the country's first
gas exports through a pipeline," Minister of Mines and Energy
Kuntoro Mangkusubroto said after yesterday's signing ceremony.

Thus far Indonesia, which is the world's largest exporter of
natural gas, has only sold gas overseas in liquefied form to
countries in the Far East.

Yesterday's agreement was signed by Pertamina president
Soegianto and Sembawang Corporation Ltd chief executive officer
Wong Kok Siew.

Also present at the ceremony were Singapore's Ambassador to
Indonesia Edward Lee and chairman of Singapore's Economic
Development Board (EDB) Philip Yeo.

Under the 22 year deal, SembGas will import 325 million cubic
feet of natural gas per day through a 470 kilometer underwater
pipeline running from the gas field in the South China Sea to
Jurong (Sakra) island in Singapore.

The pipeline is expected to become operational in 2001.

The gas will be used by power generation companies and
petroleum and chemical manufacturing companies for co-generation
and fuel oil replacement.

Major users include the proposed 1,200 Megawatt (MW) stage A
II power plant in Tuas which is owned by Singapore's Tuas Group
Pte Ltd, and the proposed 800 MW co-generation plant on Jurong
island owned by Sembawang Utilities and Terminals.

SembGas is a consortium led by Sembawang Engineering and
Construction and includes Tuas Power, Tractebel SA of Belgium and
EDB Investments Pte Ltd.

The West Natuna gas field, which reportedly contains gas
reserves of 2.75 trillion cubic feet, is being developed by
Pertamina's production sharing contractors Conoco Inc -- a
subsidiary of U.S. chemicals maker Du Pont Co. -- Canada's Gulf
Resources Ltd and Britain's Premier Oil Natuna Sea Ltd.

Under the production sharing contracts, Petamina will receive
65 percent of the gas extracted from the field and the remaining
35 percent will be split between the contractors.

Aside from the west coast reserves, Natuna contains a giant
proven gas reserve amounting to 44 trillion cubic feet off its
east coast. The field is popularly called East Natuna and is
jointly owned by Esso (50 percent), Mobil (26 percent) and
Pertamina (24 percent).

The government has a special team to oversee the development
of the East Natuna gas field which was formerly headed by
President B.J. Habibie when he was State Minister of Science and
Technology. The team is currently lead by Faisal Abda'oe, a
former Pertamina president.

The East Natuna consortium has thus far failed to market its
gas.

Yeo said the construction of an underwater pipeline to
transport gas from the West Natuna field to Jurong would start
late this year. The West Natuna field contractors will finance
the development of a 460 kilometer pipeline from West Natuna to
the border of Singapore and SembGas will finance the construction
of a 10 km pipeline from that point on to Jurong.

He said SembGas would invest US$1.2 billion in building
Singapore's share of the pipeline, power plants and
infrastructure over the next three years, while the West Natuna
field contractors would invest $1 billion to build Indonesia's
share of the pipeline and to develop the gas field.

Yeo added that the deal would bring in earnings of $8 billion
over the 22 year lifespan of the project.

"The West Natuna gas project will benefit both Indonesia and
Singapore. For Singapore, it will help us to develop further our
power generation capabilities in a cleaner and more efficient
way. For Indonesia, this is an important project that will
position it for long term growth and prosperity," Yeo said.

Singapore currently imports 150 million cubic feet of natural
gas per day from Malaysia to fuel its power plants.

Yeo said Singapore might buy more gas from Indonesia in the
future because it was increasingly looking to use gas in place of
fuel oil to drive its power stations. The country now has a power
generation capacity of 6,000 MW, about 90 percent of which
depends upon heavy fuel.

Soegianto said Pertamina was also negotiating with power
producer Singapore Power over the sale of natural gas from a
field in South Sumatra which is being developed by Gulf. If a
deal is struck, the gas will be transported through a pipeline
running across Batam island. (jsk)