Govt mulls banning gas contract extensions

Minister of Energy and Mineral Resources Darwin Zahedy Saleh said on Thursday that the government is mulling to ban all gas export contract extensions until all domestic gas requirements have been met.

Darwin said that the government might issue a presidential instruction on domestic energy supply security which could practically stop all domestic gas producers from pursuing negotiations on extensions of their contracts with overseas buyers. ?This proposition is the result from the coordinating meeting held on Wednesday at the Cipanas Palace,? he said, adding that the idea would be further evaluated.

The coordinating meeting in Cipanas, West Java was led by President Susilo Bambang Yudhoyono and attended by a number of ministers and state-owned company leaders.

He said if the idea is realized, the gas contract extensions that would be dropped would include the LNG contract extension to supply gas from Mahakam PSC to a group of Japanese buyers which are popularly known as Western Buyers. The contracts expires in 2010/11.

Indonesia and Western Buyers has principally agreed to extend the contract to supply 25 million tons of LNG to Japan for 10 years starting 2011, but thus far, no final deal has been signed.

Indonesia also exports LNG from Arun LNG plant in Aceh but the government has made it clear that no export contract extension would be given due to reserves depletion. Indonesia also exports LNG from BP-operated Tangguh LNG plant but all the contracts? expiration dates are still far away.

Indonesia also exports gas through pipeline from South Sumatra and Natuna to Singapore and Malaysia. (bernard)