Govt to give compensation to Equity Epic if contract is not extended

The government will likely give a compensation to Australian firm Equity Epic Sengkang, should it turns down the company's proposal to extend its contract on the Sengkang gas block in South Sulawesi, Koran Tempo reported on Tuesday.

Director General of Gas and Oil at the Ministry of Energy and Mineral Resources Iin Arifin Takhyan said in Jakarta on Monday that the government considered bearing the payment of the firm's loan interest as a compensation for a rejection of the proposal.

The interest of the loan obtained by the company would be included in the recovery cost payable to the company, he said.

The Australian firm has proposed to extend its contract for another three years from 2020 to 2023.

?We are still assessing the business viability of the Sengkang field. If the extention is not needed, the government will then offer a compensation to the contractor,? he added.

BPMIGAS, the government?s agency in charge of oil and gas exploration and production, has formally recommended the extention of the contract to the ministry. The agency sees the extension of the contract is needed as the compensation for the cut in the price of the electricity sold by Equity Epic to state owned electricity company PLN.

Equity Epic uses most of its gas production from the Sengkang gas field to supply the gas need of its 135-MW power plant which is also located in Sengkang. The company proposed the extention of the contract to Pertamina in 2000 as the compensation for the cut in the price of the electricity it sells to PLN. But the proposal was turned down.

BPMIGAS, which took over the oil and gas supervisory task from Pertamina in 2001, accepted the proposal and recommended the Ministry of Energy and Mineral Resources to extend the contract for another three years. (*)