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Tangguh Reserves Going to Factory

Upstream oil and gas regulator BPMigas plans to allocate up to 105 billion cubic meters of new reserves from Papua’s BP-led Tangguh gas field to power a proposed fertilizer factory nearby.

BPMigas head Raden Priyono said the reserves to be set aside for the new project were not part of the 402 billion cubic meters of gas committed to Tangguh’s four main buyers — China’s Fujian Province, Korean Gas Corp., and US-based Sempra LNG. Those buyers are set to receive their first shipment of gas in May of this year, Evita Legowo, director general of oil and gas at the Ministry of Energy and Mineral Resources, said on Tuesday.

“Our main priority is fulfilling domestic [energy] needs,” Priyono told reporters on the sidelines of the 2009 IndoGas conference on Tuesday. He said the plan to create a liquefied natural gas-powered fertilizer facility near the site would run alongside BP’s proposal to build a third gas processing unit, or train, at its plant.

“We estimate the gas needs for the petrochemical plant will be less than half of the newfound reserves,” Priyono said. “We are confident that the remaining gas will be sufficient to serve [BP’s] third train.”

BP’s first two trains are expected to come on line in June 2009 and produce 7.6 million metric tons of LNG per year.

Priyono said that BP would drill new wells in late 2009 to prove the existence of the 105 billion cubic meters of gas to be used for the project.

Djoko Harsono, BPMigas’s corporate vice president for finance, said the regulator needed to further study the viability of the fertilizer project before committing to it and indicated that other possibilities were being considered.

“If the LNG needs to be sold at an international price, then half of the 105 billion cubic meters could be exported,” he said.

BPMigas’s plans for the fertilizer plant were set in motion last month after Vice President Jusuf Kalla visited the Tangguh field and decided to build a petrochemical center at the site.

Separately, BP Indonesia country head Nico Kanter said his company was currently assessing resource potential in the Tangguh area for future LNG development.

“We are working with the government to better understand development options,” he said, “however our focus now is on train one and two delivery.”

Beyond Tangguh, BPMigas is seeking to provide sufficient gas to supply Indonesia’s existing fertilizer plants, with the aim of achieving a production target of about 7 million tons annually.

Gas supplies for the fertilizer plants are to be allocated from Tangguh and the Masela gas block in the Timor Sea, which is operated by Japan’s Inpex Corp.

Priyono said that he expects the Masela block’s Abadi field to start producing 4.5 million tons of gas annually starting in 2014.

The government has drawn foreign investors’ ire in the past by diverting gas away from overseas buyers and supplying local industries instead.

Indonesian natural gas demand is expected to increase at a rate of 2.8 percent annually over the next 12 years. Over that same time period, demand for gas on Java Island alone is expected to increase by 4.9 percent per year.

[Last update: 2009-02-02 15:41:03]

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