BP Indonesia should not be allowed to market its gas production: Expert

It will be against the country?s oil and gas law if a production-sharing contractor (PSC) is allowed to handle the marketing of gas or oil produced from its concession areas. State owned oil and gas Pertamina should continue to handle the marketing until the government establishes a new institution to carry out such activities, according to oil analyst Ramses Hutapea.

In an interview with the Koran Tempo, Ramses said that the appointment of a private company or allowing contractor to handle the marketing violates the oil and gas law. He was commenting on the willingness of BP Indonesia to handle the marketing of the gas to produced from its Tanggul giant gas project in Irian Jaya province, now called Papua.

BP Indonesia said that marketing and shipment should be part of the company?s production activities in the massive gas project. At present, a production-sharing contractor is allowed only to handle production activities, while further activities such as marketing and shipment are controlled by Pertamina.

Ramses said that it would be impossible for Indonesia to entrust marketing and distribution of strategic product such as gas to a private company. State owned companies should be involved in such activities so that the government would be able to obtain maximal benefits from the country?s gas or oil production.

The Tangguh LNG project is now under preparation for construction. The project, which will absorb about $3 billion in investment is expected to start production by 2005. The project has proven gas deposit of about 14.4 trillion cubic feet.

BP Indonesia owns 50 percent stake in the project, with the other 16 percent by Mitsubishi, 12 percent by Nippon, 11 percent British Gas, 10 percent Kanematsu Corp, and the remaining one percent by Nissho Iwai. The project is developed under 70-30 percent production sharing contract in favor of the Indonesian government.

BP Indonesia recently joined a tender to supply a power plant in China?s province of Guangdong about 3 million tons of LNG under a 25-year contract. Although the company was defeated by an Australian company in the tender, the company has been entrusted by the Chinese government as the LNG supplier of other power plant in the country?s Fujian province which needs about 2.5 million tons of LNG a year to feed the power plant. (*)