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)