Govt agrees to lower production split from Block A gas field

The government has agreed to reduce its share from the production of the Block A gas field to 52 percent from its initial demand of 70 percent so that its operator ConocoPhillips could soon begin the development of the gas field, Koran Tempo reported on Tuesday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Jakarta on Monday that the agreement was made during the Cabinet meeting on Monday. "The President agreed to reduce the government's share so that the negotiation over the development of the Block A gad field could be soon achieved," he added.

Under the proposed production-sharing scheme, the government would receive 52 percent output from the gas field, and the operator ConocoPhillips would receive another 48 percent, according to Purnomo.

The minister, however, said that the government demanded ConocoPhillips to reduce the selling price of the gas from its initial demand of US$7 per mmBtu so that the price would be more affordable to the state owned fertilizer company PT Pupuk Iskandar Muda (PIM).

The government and ConocoPhillips are currently negotiating the development of the Block A gas field which is located in Lhokseumawe, northern Aceh. The development of the gas field, which has gas reserves of about 600 billion cubic feet, is expected to cope with the shortage of the gas supply to the Arun LNG plant and nearby fertilizer producers PT PIM and Asean Aceh Fertilizer (AAF).

The LNG plant and fertilizer producers receive the gas supply from the Arun gas field but the gas supply continues to decline due to the depletion of the gas reserve at the field. The current production from the gas field is only enough to meet the export commitment of the Arun LNG plant.

Pertamina said that it would import a cargo of LNG to help the Arun LNG plant meet its June export commitment so that part of the gas production from the Arun gas field could be supplied to the fertilizer producers.(*)