BP East Java gas supply contract to be revised

Anglo-American energy giant BP Plc had agreed to ease up its preferential right to supply natural gas to industrial province of East Java to allow other gas companies to come in amid signs of declining gas reserves at BP?s offshore Kangean natural gas block, state oil and gas firm Pertamina said Friday.

BP has the preference right to supply natural gas amounting of up to 600 million cubic feet per day to East Java customers, state electricity firm PLN, state gas distribution firm PGN and fertilizer maker Petrokimia Gresik.

Pertamina?s director for production sharing management Effendi Situmorang told reporters that the decision was taken a meeting between Pertamina, government, consumers and other gas suppliers in Surabaya.

But the revision would not lead to the cancellation of BP?s preference right, said Effendi

?We proposed that the gas supply contract be revised if it turns out that BP can not supply East Java?s demand. We have asked BP to make detail calculations of the gas volume it can supply, with the remainder to be supplied by other production sharing contractors,? Effendi Situmorang said.

In 1993, Arco signed the contract to operate the East Java?s offshore Kangean gas block. Arco was then acquired by BP in 2000.

But in December 2001, it was found out that the gas supply from Kangean started to decline to 270 million cubic standard feet per day from 335 million cubic standard feet per day. The natural decline has caused BP to be able to supply gas at minimum level to East Java province, which has been facing growing gas demand particularly as fuel becomes more expensive.

BP had earlier asked Pertamina to extend its production-sharing contract in the Kangean block as it needs more time to develop the block to boost supply. Under the initial agreement, the contract will expire in 2010.

Meanwhile, Kardaya Warnika, staff expert at the ministry of mineral resources and energy, said that several production sharing contractors had gas reserves in the East Java area. Those ready for production include Lapindo, Kideco, and Amerada Hess. (Alex)