Govt to award first CBM contract to Medco consortium next month

The government will sign the country?s first coal bed methane (CBM) contract with publicly-listed PT Medco Energi International and its partner next month, a senior official of the Ministry of Energy and Mineral Resources said on Tuesday.

Director General of Oil and Gas Luluk Sumiarso told reporters that the government would take 55 percent of the gas production after deducting production costs, leaving the rest to the contractor. ?The government has accommodated the investor?s interest,? he said.

Medco?s partner in the CBM project is PT Energi Pasir Hitam Indonesia (Ephindo).

The consortium is set to invest around US$200 million to extract CBM from the concession located in Banyuasin, South Sumatra, Ephindo?s President Director and CEO Sammy Hamzah said in July 2007.

The government awarded the contract to Medco and its partner without a tendering process because the acreage belonged to Medco as an oil and gas concession.

?The government will not tender a CBM acreage if investors want to develop the resources in their existing concessions. They will have the first-right refusal in case the government offers the contract to other investors,? Luluk said.

Luluk promised that the government would provide ?incentives? for investors interested to develop the country?s CBM resources it the future. He did not provide details.

Currently, three other contracts are negotiating with the government to acquire CBM concessions in South Sumatra and Kalimantan, according to Luluk. (Godang/Bernard)