Govt rejects Donggi-Senoro consortium gas price proposal
Wednesday, May 13 2009 - 02:22 AM WIB
R. Priyono, the head of BPMIGAS, the regulatory agency for oil and gas exploration and production, said in Jakarta on Tuesday that the consortium only proposed an increase of 0.3 US cent from their previous offer of $2.4 per million British thermal unit (MMBTU).
?We want the gas price to be similar to the $3.8 per MMBTU (with the crude price assumption of $40 per barrel) previously proposed by Mitsubishi,? he said. ?The government wants more realistic price offer from the consortium,? he said.
"It is unrealistic, for instance, to assume the oil price at $7 or $200 per barrel, while the production cost is only $9 per barrel," he said.
He also said the agency is waiting for the verdict by the Business Competition Supervision Commission (KPPU) over charges by PT LNG Energi Utama, a subsidiary of LNG Limited, that Mitsubishi was selected in unfair bidding process.
Meanwhile, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources Evita Legowo said that her office still waited for the consortium?s response to the six conditions proposed by the government.
The six conditions, among others, require the consortium to revise the gas pricing scheme which is currently based on Japan Crude Cocktail index; to revise the plan of development as well as to show shareholders? commitment to domestic supply obligation. The consortium is also asked to settle accusation over unfair business practice during the tender of the LNG project.
The partnership plans to build a 2-MTPA LNG plant. Gas for the proposed plant will be supplied from Matindok Block, which is operated by Pertamina, and Senoro-Toili Block, which is jointly operated by Pertamina and Medco. The LNG plant would be built by Mitsubishi and Pertamina and Medco will sell gas to the LNG plant at well head.
The consortium had signed heads of agreement (HoA) with Japanese firms Chubu Electric Power Co. Inc. and Kansai Electric Power Co. to supply each of them with one million ton of LNG per year for 15 years starting 2012.
Pertamina has a 29 percent stake in the project, with Mitsubishi Corp. and Medco holding 51 percent and 20 percent, respectively. (godang/bernard)