Natuna gas intended for Batam and Bintan: Official

The government has set a policy allowing it to receive smaller portion of production sharing of natural gas produced by Block A in West Natuna to increase the gas supply as well as to ensure affordable gas prices for domestic consumption in Batam and Bintan, an official has said.

Block A in West Natuna is operated by UK-based oil and gas firm Premier Oil that had discovered gas reserves of 0.5 trillions cubic feet in Gajah Baru field. With the reserves, Gajah Baru field is estimated to produce 120 million cubic feet of gas per day for 20 years.

The gas has yet to receive commitment from buyers.

Since 2001, Premier Oil has channeled gas supply to Singapore?s gas company, SembCorp from the company?s Kakap and Anoa field, also on the same block.

The gas price for export demand from Singapore is set at between US$ 8 and US$9 per MMBTU, while for domestic consumption, it is priced at around US$3.5.

Energy and Natural Resources Minister Purnomo Yusgiantoro said in Jakarta Sunday that despite the reduced state revenue (from the gas), the policy was expected to give multiplier effects that would contribute to the industrial growth and the provision of job opportunities in the two regions.

Purnomo said the utilization gas in Batam and Bintan, where gas is used as a major fuel to fire power plants, would give significant rolling effects, keeping prices of gas sold to industry competitive. The cheaper electricity prices with guaranteed gas supply would certainly provide an added-value that would attract investors, he said.

Under the existing production sharing scheme (PSC), the government is entitled to 70 percent of gas fields' output, with the remaining 30 percent for contractors

The government?s move to provide a bigger portion of output to contractors is aimed to keep gas price affordable to domestic consumers, the minister said.

Even though the fixed figure has yet to be disclosed, the state earning is expected to reduce as the outcome of this policy. Similar move had once been taken by the government when it provided bigger portion of production to a gas producer who operates Block A in Aceh to ensure sufficient supply of gas to cement producer Pupuk Iskandar Muda.(godang)