The deliberation of the contract on gas supply from the Mahakam block to the Jakarta Bay Floating Storage Receiving Terminal {FSRT) is still leaving the deliberation over price unfinished.
Head of the upstream oil and gas regulatory agency BP Migas R. Priyono revealed the Jakarta Bay FSRT would be supplied with 11.75 million tons of gas for 10 years starting in 2012.
This, he added, was in line with the memorandum of agreement (MoA) between Total-Inpex and Pertamina-PGN-PLN signed in East Kalimantan in 2008.
However, he said, the deliberation of the contract was still leaving the price issue unfinished. Total-Inpex asked for investment return by 2017. "Price is the only issue left to discuss. In addition, Total also asks to have investment return by 2017."
In 2017, the contract of Total Indonesie-Inpex on the Mahakam block will be terminated. At the moment, Total-Inpex is still waiting for the final say from the government over its contract extension.
Usually in the upstream oil and gas industry, contractors tend to reduce investments pending certainty over the contract extension. As a result, performances will decline, including the oil and gas production.
In response to this, Priyono stated BP Migas had submitted its recommended options to the government to accommodate the wish of the French company. One of the options was the government could guarantee investment return for the company although the contract was not extended."
"We have submitted the recommendations to the Directorate General of Oil and Gas."
Project financing
On the other hand, Pertamina and PGN really hope for gas supply from the Mahakam block, which will be used as a guarantee to secure project financing. To have such a certainty, the signed MoA should be elevated into the head of agreement (HoA) before it is established as gas sales agreement (GSA).
Director General of Oil and Gas Evita Herawati previously said the government targeted to sign the HoA by the end of June, but it had not been realized so far.
Deputy for Operational Control at BP Migas Budi Indianto confirmed the HoA had not been realized on tough negotiation over price. He suggested Pertamina-PGN used gas economic price for the project calculation.
"It will be better to use economic LNG price for the project calculation. If the price can be lo0wer, it will be good for the project."
Evita Herawati Legowo said the negotiation over price was still running.
"The discussion has showed some progress," she told via a text message to Bisnis.
President Director of State Oil Company Pertamina (Ltd) Karen Agustiawan previously said the company targeted to enter the block, which still had a gas reserve of 12 trillion cubic feet, in the second semester of 2010. Pertamina was eyeing to acquire a 25% participating interest (PI) for a start before raising it to a 50% PI in 2017 and becoming the operator in 2027.
Minister of Energy and Mineral Resources Darwin Zahedy Saleh also supported Pertamina's plan. The support was part of the efforts to bolster the role of the national oil company.
Total E&P Indonesie previously stated it would maintain gas production from the Mahakam block at 2,300-2,400 MMscfd next year due to huge reserves.
"We will maintain production at a level of 2,300 MMscfd-2,400 MMscfd," told Executive Vice President Operations and EKD Manager of Total E&P Indonesie Hardy Pramono.
According to him, such a production level was the production level that the company had achieved this year.
He added Total never planned to lower production since the natural gas reserves in the Mahakam block was still significant. (Bisnis/raf)
http://www.bisnis.com/pls/bisnis/bisnis.cetak?inw_id=741853
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