Pertamina backs BP effort to extend Kangean contract
Friday, February 23 2001 - 04:00 AM WIB
State oil and gas company Pertamina said Wednesday it backed British-American oil and gas giant Beyond Petroleum's (BP) effort to extend its current production sharing contract (PSC) on the Kangean block in East Java long before the expiry of the contract.
Pertamina's exploration and production director Gatot K. Wiroyudo told Petromindo.com that BP's effort was reasonable in economic sense.
"The plan to extend or renew PSCs is linked with contractors' planned activities in the area.
"So if a contractor wants to add some more investment to develop the area, and thinks that it needs some more time to see the results of the new investment, I think it reasonable that it needs assurance that its contract will be extended," he said.
Earlier, BP said he has asked the government to renew its Kangean PSC as it planned to invest of up to US$ 350 million to develop another gas field in the block.
Company president for Indonesia Bill Schrader earlier told Petromindo that BP would like to get an assurance from the government that it would extend its contract to 2030 when the current contract expired in 2010.
Analysts say the company's move is unusual as all contractors usually ask for the extension of their contracts several years before the expiry of their contracts.
Some analysts opine that BP would not like to have the same experience with PT Caltex Pacific Indonesia, which has reportedly put additional investment in its Coastal Plains Pekanbaru (CPP) block in Riau, but finally failed to renew its contract on the block.
Currently, BP produces about 340 million cubic per day (MMCFD) of natural gas from Pagerungan gas field in Kangean to supply state owned petrochemical producer Petrokimia Gresik, state owned gas distributor PGN and state owned electricity company PLN in East Java.
Schrader warned that gas production at Pagerungan would start to drop from 2002 due to declining reserves, threatening the continuity of gas supply to the three buyers.
He further said in order to make up for the decline in Pagerungan, it was necessary to develop Terang/Sirasun gas field, which had 1 trillion cubic feet (TCF) of gas reserve.
"Even if we start to develop Terang/Sirasun now, we will not be able to start production before 2004," said Schrader.
"Therefore it is necessary for BP to get the contract renewal to guarantee that we have time to get the pay out.
"The 20 years extension will also enable us to do some more explorations in the Block," He said. (alex)