Gas price of Jambaran-Tiung Biru project lowered to $7/mmbtu

By Febry Silaban

The government has proposed to lower the gas price from the Jambaran-Tiung Biru (JBT) fields project to US$7 per mmbtu, from the initial proposal of $8 per mmbtu, for fertilizer industry, as part of President Joko Widodo?s newly-launched First Phase Economic Policy Package to lower gas price for domestic industry

?The normal gas price from JBT fields project is $8/mmbtu with a price escalation of 2 percent per year, but we have proposed the price for the fertilizer industry be cut to $7/mmbtu with a price escalation of 2 percent per year,? Chairman of upstream authority SKK Migas Amien Sunaryadi said in Jakarta.

According to Amien, the government reduced its gas production share from the fields in order to lower gas price for state owned fertilizer firm PT Pupuk Petrokimia Gresik (PKG) in Gresik, East Java.

?The state gas production share will be reduced from 45.76 percent to 40.20 percent, which will result in a decrease in state revenue (from the project). However, it will provide a stimulus for thousands of workers at PKG?s site and surrounding areas, and its products will be useful for farming at the area,? he said.

Thus far, according to reports, no gas sales and purchase agreement (GSPA) has been signed between the JBT project owner and PKG because Husky-CNOOC Madura Ltd (HCML) was also interested to supply gas to PKG from its MDA-MBH field within Madura Strait PSC offshore East Java. HCML reportedly offered its gas at $7.4 per mmbtu with a price escalation of 3 percent per year -- below the $8 price initially proposed by the JTB project?s owner.

The JBT project is still under construction with startup scheduled for the first quarter of 2019.

Director General of Oil and Gas I.G.N. Wiratmaja Puja explained that while the government?s take of the gas from the JTB project has been reduced, it, however, can lead to a growth of investment by over US$2.8 billion.

Later this month, the government will issue a new presidential decree on the policy to lower the gas price. The decree will be applied to new contracts, starting Jan. 1, 2016.

Wiratmaja added that there are seven projects where the new regulation is very likely to be applied, They are among others Jambaran Tiung Biru project (for fertilizer production), Bontang V project (for the fertilizer production of PT Pupuk Kaltim), Bulu PSC-KrisEnergy project (for electricity), Simenggaris project (for mini refinery), Bangkanai-Ophir project (for electricity), Sengkang LNG project (LNG plant for eastern Indonesia), Lampung FSRU project (for gas power plant and industry in western Java).

Last year, the Ministry of Energy and Mineral Resources issued a letter on the allocation of gas from the JBT project. Based on the letter, 100 mmscfd is allocated for Pertamina, 85 mmscfd for PKG. Pertamina will resell the gas to state owned electricity firm PT Perusahaan Listrik Negara.

Tiung Biru field is located within Pertamina EP?s Cepu operations area which is adjacent to the giant Cepu oil and gas block jointly operated by ExxonMobil Cepu Limited (EMCL), a unit of ExxonMobil Indonesia, and Pertamina EP Cepu (PEPC). The Jambaran gas field is located within the Cepu block, which is operated by EMCL. EMCL and Pertamina EP agreed in September 2012 to unitize both fields with PEPC serving as operator.

Editing by Johannes Simbolon