BP asks for special treatment for Tangguh project

Word's major oil giant BP has formally asked for a special treatment from the government in the operation of its Tangguh gas project which is now being developed by the company in Papua province, Koran Tempo reported on Thursday.

The oil giant, among others, has required the first tranche petroleum (FTP) not to be imposed during the early stage of the company's production. In addition, BP also wants the government to provide a guarantee if there is a default in fulfilling the company's contacts with buyers.

These requirements were stated in the principles of agreement signed by the government's oil and gas authority BP Migas and BP in Bali on July 1.

BP's spokesman, Jakob Kastanja, acknowledged in Jakarta on Wednesday that the company had asked for a special treatment in the FTP and the government's guarantee. He said that the government had yet to decide whether or not it will give a special treatment to BP. "It is now being negotiated," he said.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro has said that the government would form a special team to study BP's proposals on both FTP scheme and the guarantee.

Under the existing FTP, the government's portion from the gas production split with BP during the early stage of the operation is taken from the gross production. BP, however, wants the government's share to be taken from net production (after being deducted from operating cost).

Purnomo said that if the production split is based on net gas production, the government could get nothing from the Tangguh project, given the large amount of the investment to be made for the project.

About the guarantee requirement, Purnomo said that BP wanted the government to guarantee the gas supply if BP, for certain reasons, could not be able to fulfill the contracts with its gas buyers. "In this case, the government will take all the responsibility if there is a default in fulfilling the contracts," the minister said. (*)