Upstream oil and gas regulator BPMigas has rejected a plan of development (POD) for a liquefied natural gas (LNG) project proposed by Energy Equity Epic Sengkang, a subsidiary of Australia-based Energy World Corporation (EWC), on the grounds that the proposal is incomplete.
“The POD is not backed up with valid data. How can we approve the POD if we don’t even know
the reserve data?” BPMigas’s chairman, R. Priyono, told reporters Thursday.
Energy Sengkang, 100 percent owned by EWC, holds the production sharing contract (PSC) for the Sengkang Block located in South Sulawesi province. EWC said the block potentially has reserves of between 2 trillion and 4 trillion cubic feet (TCF) of recoverable gas.
Currently the gas from the block is used to fuel a 195 megawatt gas-fired combined-cycle power plant operated by PT Energi Sengkang, another subsidiary of EWC.
Since September last year, EWC has had under consideration that it may build an LNG plant near the block. The plant would be built with a production capacity of 2 million metric tons per annum (MTPA) and this would later be ramped up to 5 MTPA, Stewart Elliot, CEO of EWC said on Sept. 7 last year.
He said that the company has additional reserves that could also be processed by the proposed
EWC’s executive director Brian Allen said during a hearing with the House of Representatives Commission VII overseeing energy and mineral resources on Monday that the new reserves would be able to provide between 300 billion cubic feet (BCF) and 500 BCF of gas for the LNG plant
He said the proposed LNG development would cost EWC about US$500 million in investment.
To facilitate the financing and funding for the LNG project, part of the LNG would be exported.
“This will be a small percentage of the overall production of LNG,” he said.
EWC’s general counsel Thompson Situmorang said Thursday it was too early to say that the POD had been rejected.
“Word ‘reject’ is inaccurate as this matter is still under discussion,” he added.
Thompson said that the 3D seismic survey would be very expensive for marginal field like Sengkang.
“We propose a mini-seismic method which will be more economical and cause no harm for the environment, but BPMigas has not agreed yet,” he added.
Priyono said BPMigas rejected Energy Sengkang’s work program and budget (WPNB) for development of new gas reserves in the block.
“We cannot approve their WPNB for drilling activities, because they don’t follow the SOP [standard operating procedures]. It’s strange they want to drill without an initial seismic survey,” Priyono said.
Energy Sengkang is one of 232 oil and gas contractors operating in Indonesia. Based on their proposed work programs and budgets for 2010, the contractors plan to spend nearly US$16 billion in upstream activities in this coming year.