BP agrees with government?s plan to remove its exclusive rights

BP Indonesia has agreed with the government?s plan to remove the oil and gas giant?s exclusive rights over the supply of natural gas in East Java later this month, the company?s Vice President for Government Affairs Satya W. Yudha said as reported by Suara Karya on Monday.

"For us, we don?t have any problem with the removal of the exclusive rights. In fact, many producers have started to sell their gas in East Java," he was quoted as saying. According to him, the removal of the exclusive rights was fair enough because BP had failed to meet its commitment to supply 600 million standard cubic feet per day (MMSCFD).

"We could not fulfill the gas supply commitment signed with the government. We have so far been able only to supply about 280 million standard cubic feet per day," he was quoted as saying by the newspaper.

BP Indonesia was given exclusive rights in 1980 to sell natural gas to industrial users in the province as part of the deal it received from the government in developing its Kangean gas block in the province. With such privilege, other companies intending to sell their gas in the province should receive approval from the British oil and gas giant.

But BP Indonesia has failed to meet its commitment to supply about 600 million cubic feet of gas per day due to the decline in the company?s production. This has caused a major shortage in the gas supply to state owned gas distribution company PGN and other industrial users such as state owned electricity company PLN, PT Petrokimia Gresik.

The exclusive rights awarded to BP Indonesia is actually valid until 2010 but a continued decline in its gas supply has prompted the government, through the Implementation Body, to terminate the privilege earlier that the initial schedule.

The chairman of the Implementation Body of Oil and Gas, Rachmat Sudibyo, said that the agency would amend the gas supply contract with BP later this month and remove the exclusive rights given to the company.

Pertamina?s director for production sharing management, Effendi Situmorang, said that under the new contract BP would be limited only to sell about 200 million standard cubic feet per day in the province which needs about 600 million standard cubic feet per day.

He said that the remaining 400 million standard cubic feet per day would be supplied by other producers Amerada Hess, Kodeco, Lapindo Brantas and by Pertamina?s won gas fields. (*)