Business

Consortium expects govt
approval on East Natuna

A business consortium seeking to develop the East Natuna gas field in the South China Sea expects the Indonesian government to conclude an assessment on its business proposal before the end of the year.

Pertamina president director Karen Agustiawan told reporters last week that the company, along with other consortium members: US-based ExxonMobil, France’s Total SA and Thailand’s PTT Exploration and Production (PTT EP), had set a target of Dec. 10 for the conclusion of the so-called principles of agreement (PoA) with the government.

“We hope all of the discussions relating to plans to develop the East Natuna block are finalized before Dec. 10,” she said in Jakarta.

The agreement on the PoA related to the development of the East Natuna field, formerly known as the Natuna D-Alpha block, is an essential point before the production sharing contract (PSC) for the block can be signed.

The East Natuna gas field is expected to begin production in 2020 with peak production expected to reach 4,000 million standard cubic feet per day (mmscfd) of gas and last for at least 20 years before it starts to enter a declining stage.

The East Natuna block has total proven reserves of 46 trillion cubic feet (tcf)—making it the biggest gas reserve in Asia—but with a high level of carbon dioxide content it will take several years to study how to manage the carbon dioxide waste.

The condition pushes the consortium members to ask for a number of incentives or “special treatment” from the government in order to ensure that companies can plan their investment for the block.

Earlier, Pertamina upstream operation director Muhammad Husen said that there were several issues in exploring and exploiting the block the government had yet to agree on, including contractual and fiscal matters.

The consortium members had, he added, requested for the length of the contract to be extended from 30 to 50 years as well as a five-year tax holiday and 150 percent of investment credit, among other requests in the proposal.

Other problems include Pertamina’s plan to build pipelines as the infrastructure for East Natuna, with an estimated investment of US$24 billion. Earlier reports said that the massive gas project would require about $40 billion for development in total.

The government had earlier expected the gas block to be developed under the scheme of a liquefied natural gas (LNG) plant, as it would be easier for the domestic market to absorb the gas that the field would produce.

Separately, the Energy and Mineral Resources Ministry’s director general for oil and gas affairs, Evita Herawati Legowo, said the government expected the PSC for the East Natuna block to be signed by the end of this year.

“Personally, I hope it can be signed before I retire from the ministry by the end of November,” she said in a text message sent to The Jakarta Post.

As widely reported, Pertamina currently holds a 35 percent participating interest in the consortium, while ExxonMobil holds a 35 percent interest and Total SA and PTT EP each own 15 percent.

In November, ExxonMobil Indonesia vice president for public and government affairs, Erwin Maryoto, confirmed the number of participating interests in an interview with the Post.

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