Three firms sign MoU on gas delivery to Batam

The Jakarta Post, Jakarta

Canadian firm Gulf Indonesia Resources Ltd, state oil and gas company Pertamina and state gas distribution company PT PGN have signed a memorandum of understanding (MoU) for the supply of gas to the industrial island of Batam.

The MoU was signed by the three companies on Thursday in Batam, according to a joint media release made available to The Jakarta Post

Under the MoU, Gulf Indonesia will supply PGN with up to 50 million cubic feet per day (MMCFD) of natural gas from its Corridor Block PSC in South Sumatra. PGN will market the gas to various domestic industrial and commercial customers, the power plant owned by state electricity company PT PLN and residential customers on the island.

The gas will be delivered through the pipeline facilities from South Sumatra to Batam and on to Singapore, which are currently under development by PGN.

The Sumatra gas to Singapore gas sale agreement was signed in February 2001. The physical construction will commence in June 2002, with mechanical completion targeted for late 2003.

According to the government's data, Batam, which is the country's most successful bonded zone, now hosts about 470 foreign investors and 8,000 local small and medium enterprises. The government has planned to turn the island into a free trade zone.

PGN said it would soon start the development of its Batam gas distribution network.

"In the first stage, no less than 115 kilometers (km) of distribution network made of steel and polyethylene will be constructed, originating from Panaran Offtake Station," PGN's president WMP Simandjuntak said.

The parties expected to sign a definitive agreement by August this year.

"This MoU is a critical step towards securing another market for the abundant gas reserves in the Corridor Block PSC," Gulf's president and CEO Paul C. Warwick said. "We look forward to cooperating with PGN in other areas to fully develop this resource and the ASEAN gas grid,"

ASEAN countries have long mulled the idea of building the ASEAN grid, which links Indonesia's gas fields with other ASEAN countries.

Gulf holds a 54 percent working interest in the Corridor Block in partnership with Pertamina (10 percent) and Talisman (35 percent).

Gulf, headquartered in Jakarta, is an upstream oil and gas company, traded publicly on the New York Stock Exchange. With effect from July 16, 2001, it has been 72 percent owned by American oil firm Conoco Inc.