Dubious gas exports to Malaysia unveiled

Alfian ,  The Jakarta Post ,  Jakarta   |  Wed, 09/10/2008 11:04 AM  |  Business

While unease persists over the controversial gas deal with China, lawmakers have hit hard at the oil and gas authority over a dubious gas deal with Malaysia which may have caused hefty state financial losses.

A member of the House of Representatives' Commission VII overseeing energy and mineral resources, Wahyudin Munawir, revealed the case during a hearing with upstream oil and gas regulator BPMigas on Tuesday,

Wahyudin believes a 20-year export contract for natural gas from the ConocoPhillips-operated Blok B in the Natuna sea to Malaysia's Duyong complex, operated by Petronas, may be deemed underpriced.

The gas price in the 2002 contract was set at a fixed rate of just US$2.8 per million British thermal unit (mmbtu), according to Wahyudin.

"With the current domestic price of gas at $5 per mmbtu, the contract so far has cost the state up to Rp 4 trillion in losses since 2002," he said, adding that losses could be assessed at Rp 12 trillion if the calculation was based on international prices.

Natural gas exports to Malaysia started in 2002, with a first year's delivery of only 38.5 billion British thermal units per day (bbtud). The annual volume rose to 209 bbtud by last year.

BPMigas refused to deny or confirm the findings.

BPMigas deputy chairman for operations, Eddy Purwanto merely said the contract negotiation started in 2000 and was signed in 2002.

"The stipulated price was based on the price of high sulfur fuel oil (hsfo) at that time. However, the HSFO price is not so good lately and as the result the natural gas price (for this deal) is more or less only $2.8 per mmbtu," Eddy said.

He added BPMigas had begun to renegotiate the gas price.

"Now, we are in talks to renegotiate the contract for a better price. We hope that we can make progress before the end of this year," he said.

The government has been pressured to review all oil and gas contracts following the recent debacle over the export of liquefied natural gas (LNG) from the Tangguh field in Papua to Fujian province in China, at uncompetitive prices.

Vice President Jusuf Kalla called the deal the country's most devastating contract ever made, as the selling price had only limited links to the movement of oil prices, defying the usual practice of gas contracts.

Aiming to resolve the much-debated Tangguh gas deal with China, the government is setting up a team to be led by the Coordinating Minister for the Economy Sri Mulyani Indrawati to renegotiate the selling price.

The team will be directly supervised by Vice President Kalla.

The contract in question was signed in 2002 by the administration of then president Megawati Soekarnoputri.

The arrangement called for Tangguh field to supply LNG to China's Fujian province for 25 years, starting in 2009.

Under the contract, the price of LNG was pegged at $2.40 per million mmbtu without adequate mechanisms to adjust to increases in crude oil prices.

The selling price has since been improved to $3.40, but still falls far below the current international LNG price of about $20.

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