Parliament likely to OK BP's Kangean Block contract extension

The parliament (DPR) will likely approve the extension of BP Plc.'s contract in an offshore East Java block by 20 years, in order to secure natural gas supply in the province, Dow Jones Newswires quoted as saying a government official on Friday.

"The parliament, in principal, agrees with the extension of the contract," said Agusman Effendi, deputy head of parliament's oil, gas and mining commission.

"The contract's extension is not merely for the benefit of the investor, but it's (also) to overcome a natural gas shortage in East Java," he added.

BP Indonesia, the local unit of BP Plc, is seeking the extension of its production sharing contract for the offshore Kangean Block by a further 20 years to allow exploration and development of another gas field there.

The current contract will expire in 2010. BP plans to invest US$400 million to develop the Terang Sirasun field, which is estimated to have around one trillion cubic feet of natural gas reserves.

East Java has begun experiencing a natural gas shortage, as one of BP's natural gas fields has been significantly depleted. BP was given the exclusive right to supply natural gas to electricity plants in East Java.

Agusman said parliament will give its approval after BP has provided it with the details of its plan for the block. (*)