S

tate oil and gas giant Pertamina is struggling to seal an agreement for the natural gas to be produced from its Tiung Biru field in Central Java amid a decline in gas prices in global markets.

Pertamina president director Dwi Soetjipto said his company was selecting the buyers of the gas and calculating the right price for it.

'€œThe negotiations are on the process. In line with the government'€™s policy, we will prioritize domestic needs because there will be a shortage of gas in the future,'€ Dwi said on Sunday.

The Tiung Biru field is located about 15 kilometers southeast of Cepu in Central Java and approximately 28 kilometers northeast of Bojonegoro in East Java. It is also located in the same area as the Jambaran field, which is operated by Mobil Cepu Limited, a subsidiary of US-based ExxonMobil.

In early 2012, Pertamina reported that it found significant gas reserves after exploring in Tiung Biru, a field that is predicted to yield 2.75 million standard cubic feet of gas per day (mmscfd) and 2,546 barrels of oil per day (bopd), according to figures from the Energy and Mineral Resources Ministry.

The company, which serves the operator of the Tiung Biru field, has also signed a contract for the front end engineering design (FEED) for the development of facilities to process oil and gas in the field. The FEED contract was awarded to a consortium of PT Singgar Mulia and PT Fluor Daniel Indonesia in June last year. The FEED works are scheduled for 10 months, which will be followed by post FEED works for another eight months.

Tiung Biru is expected to start gas production in 2017.

Indonesia, a former member of the Organization of Petroleum Exporting Countries (OPEC), has been struggling to use more gas as an energy source to fill the widening gap of demand and supply caused by the declining production of domestic oil fields. A significant amount of gas resources has made the country a major liquefied natural gas (LNG) exporter. However, the country is expected to become a net importer of gas as early as 2020 as the domestic demand will grow just as output from existing gas fields will be depleted. Expected delays in several major new gas projects will also contribute to the need to import gas.

The Upstream Oil and Gas Regulatory Task Force (SKKMigas) deputy for operations, Muliawan, said the regulator expected that gas from Tiung Biru could be delivered to end consumers through the trans-Java pipeline, which is currently under development.

'€œMost production from gas field development on Java is absorbed by domestic buyers because the infrastructure is ready. There will be a pipeline connecting Semarang in Central Java to East Java, which can absorb the gas,'€ Muliawan said.

He was referring to the development of a gas pipeline from Semarang to Gresik in East Java, which is currently being built by PT Pertamina Gas (Pertagas), which is a subsidiary of Pertamina specializing in gas distribution.

Another pipeline is currently also being planned to connect Semarang to Cirebon in West Java, the development rights of which are held by PT Rekayasa Industry (Rekind). The Cirebon-Semarang development has been stalled partly because Rekind is struggling to find a gas supply. In a recent development, Rekind has approached Pertagas to cooperate in the Cirebon-Semarang gas project. Should the pipeline be completed, a gas facility network will connect West Java to East Java.