Pertamina, BP ink C. Java gas accord: Report

State oil and gas company Pertamina and BP Indonesia have signed a memorandum of understanding for gas development and sale from a field offshore Central Java, Dow Jones Newswires reported Wednesday.

Indonesia Power, a unit of state-owned power company PT PLN, will offtake the gas developed in Kepodang, "a virgin field" in BP's Muriah production sharing contract area, Dow Jones Newswires quoted as saying BP Indonesia vice president Budiman Parhusip.

The MOU will be used as a reference for future gas price negotiations between BP, Pertamina and Indonesia Power.

BP is an operator-cum-contractor, while Pertamina acts as a government intermediary in the management of production sharing contracts.

The Indonesian unit of BP PLC (BP) drilled three delineation wells in the Kepodang field in 2001, and plans to develop the field for gas production by the third quarter of 2005, said Budiman.

Meanwhile, the Tambak Lorok power plant in Semarang, Central Java will be supplied with 147 million standard cubic feet a day of gas from the offshore Kepodang field when the production starts, he added.

BP has been engaged in a tussle with Pertamina because it has not been able to deliver gas in accordance to its contractual supply monopoly in East Java, consequently creating a supply shortfall that needs to be offset by costly diesel imports.

BP has since agreed to relinquish the gas supply privileges in East Java. (*)