Govt softens stance on Natuna gas block PSC termination

Minister of Energy and Mineral Resources Purnomo Yusgiantoro softened stance on termination of ExxonMobil-operated Natuna D-Alpha block, saying that the government only wanted better more favorable split and that the gas reserves from the block could be exploited to meet domestic market demand.

Possible change of the terms and conditions of the contract of the Natuna D-Alpha area with ExxonMobil Corp, was discussed in a meeting with Vice President Jusuf Kalla, with the increase in government?s portion of share in the contract highlighted, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said.

According to Purnomo, the government has no intention to put pressure on ExxonMobil to allow for the entry of another company into the contract.

One day earlier, Purnomo said that the block?s PSC contract was terminated to ExxonMobil?s inability to meet commitments. Exxon insisted that contract on the block would expire in 2009.

Head of upstream oil and gas regulator, BP Migas Kardaya Warnika said that despite ExxonMobil?s interest to renew the contract, there should be an improvement in the contract that is more beneficial to the government.

On the gas prices, the government sees the need to consider the improvement in the price in the Riau Island by providing an incentive for the development of the Natuna D-Alpha block given that price of gas sold to Malaysia and Singapore is higher.

The domestic price of gas in Batam and Bintan is around US$3.5 per MMBTU.

Purnomo said that it would not be a problem to raise the gas price up to US$5 per MMBTU.

The Natuna D-Alpha block have 46 trillion cubic feet of recoverable gas reserves.

Exxon?s working interest in the Natuna D-Alpha area is 76 percent, with its partner, state oil and gas company Pertamina owning a 24 percent share in the block. (godang)