BP Migas rejects ConocoPhillips request of revenue share increase
Wednesday, February 18 2004 - 07:34 AM WIB
BP Migas? chairman Rachmat Sudibyo said the revenue share requested by the contractors was too high, adding that he had asked ConocoPhillips to revise the proposal.
?We have given it (ConocoPhillips) one month to revise its proposal,? Rachmat told reporters on the sidelines of a hearing with the House of Representatives? Commission VIII which oversees among others energy and mining affairs.
Both American firms equally own the block with ConocoPhilips acting as the operator.
Both firms have reportedly asked BP Migas to raise their revenue share to 50 percent with the government to keep the remaining 50 percent of the revenue. No information is immediately available on the share split in the contract held by the firms but under the standard PSC, the government takes 70 percent of gas output, while the remaining 30 percent goes to contractors.
ConocoPhilips have reportedly argued that it needed to get a higher share of revenue from the block because the gas of the block has a high sulfur content, which boosts production costs.
ConocoPhilips took over the block in 2002 as part of the deal to acquire all Indonesian assets of Canadian firm Gulf Resources Indonesia. The block has yet to produce gas but prior to the acquisition by ConocoPhilips, a senior official of Gulf once said it contains 600 billion cubic feet of gas.
The firm made the request for a rise in the revenue share amid gas supply shortage experienced by the province?s fertilizer firms, PT Pupuk Iskandar Muda and PT ASEAN Aceh Fertilizer.
Currently, gas supplies in the province come mostly from the Arun field owned by ExxonMobil. However, gas supplies to the two fertilizer plants has been discontinued because the Arun existing production is only enough for LNG producer PT Arun NGL Co. to meet its export commitment. As the consequence, the government has to import LNG from foreign sources to meet Arun's export commitment and the Arun gas can be supplied to the fertilizer plants.
Rachmat said the government would study if it was urgent to develop the block and whether the development of the block needed a lot of investment.
?(Before making a decision) on the share split, we have to see if it is urgent to develop the block. We shall also see if it is true that it needs expensive equipment to develop the block,? he said. (Godang)