Exclusive: BP wants Kangean Block early contract renewal

British giant Beyond Petroleum (BP) is asking the government to renew the contract of Kangean Block Production sharing contract (PSC) in East Java Sea in return for commitment to invest of up to US$ 350 million to develop another gas field in the Block.

The company's president for Indonesia Bill Schrader told Petromindo.com in an interview that the Block's contract would expire in 2010, and BP would like to see the government extending the contract to 2030.

Currently, said Schrader, BP produced about 340 mmcfd of gas from Pagerungan gas field to supply gas to state owned petrochemical producer Petrokimia Gresik, state owned gas distributor PGN and state owned electricity company PLN in East Java.

Schrader said gas production at Pagerungan would start to drop from 2002 as reserves decline which would threaten the continuity of gas supply to the three buyers.

He further said in order to make up for the decline in Pagerungan, it was necessary to develop Terang/Sirasun gas field, which had 1 trillion cubic feet (tcf) of gas reserve.

"Even if we start to develop Terang/Sirasun now, we would not be able to start production before 2004," said Schrader.

"Therefore it is necessary for BP to get the contract renewal to guarantee that we have time to get the pay out..?The 20 years extension will also enable us to do some more explorations in the Block," He said.

He also said the renewal would save the government hundreds of millions of dollars since the gas supply would be secured and no need to turn much more expensive diesel fuel.

Separately, director general of oil and gas in the department of energy and mineral resources Rachmat Soedibjo said that the government is still studying BP's proposal. (alex)