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Jakarta Post

Govt looks to approve East Natuna bid

  • Amahl S. Azwar

    The Jakarta Post

Jakarta   /   Wed, August 14, 2013   /  09:51 am

The government will likely grant the production-sharing contract (PSC) for the East Natuna gas field in Riau Islands this year after reviewing the business consortium'€™s proposal over the gas project.

With an estimated reserve of 46 trillion cubic feet (tcf), the East Natuna block is said to be the largest in the region.

The Energy and Mineral Resources Minister Jero Wacik said in Jakarta on Tuesday the request for a five-year tax holiday from the consortium was currently the final item to be discussed before awarding the PSC.

'€˜'€™It is very likely for the five-year tax holiday to be awarded to the contractor from 2024 to 2029,'€™'€™ he said.

The East Natuna gas field is expected to begin production in 2024 with an estimation that it would take 10 years for the consortium members to explore the field.

The peak production of East Natuna is estimated to reach 4,000 million standard cubic feet per day (mmscfd) of gas over a time span of at least 20 years before supplies begin to decline.

The government'€™s approval of the principal of agreement (PoA) signed by the consortium members '€” state-owned oil and gas firm PT Pertamina, US-based ExxonMobil, France'€™s Total SA and Thailand'€™s PTT Exploration and Production (PTT EP) '€” has already been postponed several times.

The PoA was initially signed by the consortium'€™s members in August 2011 when Malaysia'€™s Petronas was still in the consortium. Petronas was replaced by PTT EP last year.

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

The PoA must be approved by the finance minister.

Initially, the Natuna PSC was due to be signed in October 2011 before it was postponed to mid-2012. It was then postponed again to November 2012 and, finally, to this year.

The East Natuna block has total proven reserves of 46 trillion cubic feet (tcf), making it the largest gas reserve in Asia.

However, with a high level of carbon dioxide content it will take several years to study how to manage the carbon dioxide waste.

This situation has driven the consortium members to ask for a number of incentives or '€œspecial treatment'€ from the government in order to ensure that the companies could plan their investments for the block.

The consortium members requested the contract be extended from the normal 30 to 50 years plus a five-year tax holiday and 150 percent investment credit, among other requests in the proposal.

Separately, the Energy and Mineral Resources Ministry'€™s oil and gas director general Edy Hermantoro said that the East Natuna contractor would likely to receive bigger production split than other oil and gas contractors in the nation.

'€˜'€™The production-sharing split for the East Natuna is either 55:45 or 45:55,'€™'€™ he said.

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