ExxonMobil pulls out from JTB project, Pertamina assumes full control

By Godang Sitompul

ExxonMobil is pulling out from the Jambaran Tiung Biru (JTB) gas field project in Central Java in a move possibly due to disagreement over the selling price of gas from the project.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said on Tuesday that ExxonMobil has reached agreement with state-owned oil and gas firm PT Pertamina over the transfer of the former company?s interest in the JTB field to the latter. He did not provide details of the agreement including on the selling price of the ExxonMobil shares in JTB.

ExxonMobil Cepu Limited previously owned a 41.4 percent interest in the JTB project. Meanwhile, Pertamina through Pertamina EP Cepu owned 41.4 percent and through Pertamina EP owned 8 percent, with the remaining 9.2 percent participating interest held by company owned by local administrations.

With the transfer of ExxonMobil?s interest, Pertamina becomes the majority owner with about 90 percent shares in the JBT project.

Pertamina on Tuesday signed a heads of agreement (HOA) with state-owned oil and gas firm PT PLN to supply gas from the JTB project at a price of US$7.6 per mmbtu, according to a statement issued by the Ministry of Energy and Mineral Resources.

The HOA is expected to be followed up with the binding gas sales and purchase agreement, hopefully within a month, which will pave the way for Pertamina to start construction of the JTB project, targeted to start gas production in 2020.

The gas selling price agreement comes following lengthy negotiation process between Pertamina and PLN. Pertamina initially demanded for a gas price of more than $8 per mmbtu to make the JTB project economically feasible. But PLN has demanded for a lower price of $7 per mmbtu.

Meanwhile, to allow for a lower gas selling price, Arcandra said that the ministry has asked Pertamina to bolster efficiency and cut down capital expenditure plan for the JBT project to $1.55 billion from the initial projection of $2.1 billion as set under the plan of development.

The ministry said in the statement that the JTB project is expected to produce 330 mmscfd of gas with sales volume of 172 mmscd for 16 years. About 100 mmscfd will be allocated for PLN, and the balance 72 mmscfd for industries in Central and East Java provinces.

The gas will be transmitted via the Gresik-Semarang pipeline which is targeted to be completed next year, the statement said.

Editing by Reiner Simanjuntak