T

he government intends to allocate all gas produced from the East Natuna block to domestic industries in order to further develop the downstream sector.

Although gas production is currently able to meet industry demand, consumption is expected to rise exponentially, leading to a national gas deficit by 2030.

The government hopes that the East Natuna block, previously known as D-Alpha, can plug the gap as it has proven reserves of 46 trillion cubic feet (tcf), making it one of the largest gas deposits in Asia.

Interim Energy and Mineral Resources Minister Luhut Pandjaitan said on Thursday that the government was hoping the East Natuna block would play a large role in its vision to turn gas to a prime economic mover, instead of just fodder for state revenue.

“We want ExxonMobil, Pertamina and PTT EP to start operations as soon as possible because we want all of its gas to be allocated for our domestic needs,” he said during a hearing at the House of Representatives Commission VII overseeing energy.

State-owned oil and gas company Pertamina has vowed to sign a production sharing contract (PSC) for both oil and gas reserves in East Natuna Islands, Riau Islands province, with US-based ExxonMobil and Thailand’s PTT Exploration and Production (PTT EP) this month.

The PSC would ensure that oil production could start in 2019 while the consortium of companies continued its two-year study in the field as the gas reservoir has a notoriously high concentration of carbon dioxide (CO2), at 72 percent.

The level of CO2 is the highest among exploration fields worldwide and will require significant investment in advanced technology to optimize extraction at the block.

Although the government has not published its investment estimate, previous reports cited figures between US$20 billion and $40 billion.

Luhut acknowledged that the current profit-sharing scheme, which enables the government to receive 80 to 85 percent of revenue from oil and gas fields, could not be applied to East Natuna due to the high investment that operators needed to put into extraction technology.

“That is one of the issues we are discussing with the Finance Ministry; it cannot be uniformly applied to every block,” he said.

Pertamina executive director Dwi Soetjipto confirmed that a profit-sharing scheme of 85:15 would not be economically viable, and the consortium of companies is currently still discussing an alternative scheme with the government.

“One of the options we have discussed is a 60:40 scheme,” he said, affirming that the larger portion would be for the companies.

During a recent visit to Malaysia, Luhut offered Malaysia-based Petronas the opportunity to join the East Natuna consortium and to explore as the company already possesses the technology needed to separate CO2 from gas. He also offered Petronas the chance to conduct oil and gas exploration in other fields within Natuna Islands.

Petronas previously joined the consortium in 2011, alongside France-based Total. However, the Malaysian company quit in 2012 and was replaced by PTT EP.

Dwi said there had not been any discussion about such cooperation, but Pertamina was open to the possibility.

“It is possible to join in during the process but we have to see how large a portion it wants to take,” he said.