Pertamina, Medco sign gas contract for Bunyu methanol plant

State owned oil and gas firm PT Pertamina and PT Medco Energi International will start producing gas from South Sembakung field in Simenggaris PSC, which will allow the latter to resume the operation of the methanol plan on Bunyu island in East Kalimantan.

On Tuesday, PT Pertamina Hulu Energi (PHE) Simenggaris and PT Medco EP Simenggaris, which operate Simenggaris field through PHE-Medco E&P Simenggaris JOB, signed a gas sales and purchase agreement with PT Pertamina Gas (Pertagas) and PT Medco Gas Indonesia. Pertagas and Medco Gas will channel the gas to the Bunyu methanol plant.

Under the 11-year contract, the PHE-Medco E&P Simenggaris will supply a total of 72,69 trillion British thermal unit (TBTU)worth US$215 million at the rate of 20 billion British thermal unit (BBTU) per day starting in the fourth quarter of 2011.

?The gas will be channeled through 10? x 55 km pipeline to be built by the consortium of buyers at a cost of between $25 million and $30 million,? Pertamina said in a statement.

?With the gas supply, we shall be able to resume production of methanol on Bunyu island,? Medco EP?s President Director Budi Basuki said.

The Bunyu methanol plant, owned by Pertamina but was operated by Medco, has been suspended for years due to the lack of gas.

With a gas supply of 20 BBTU per day, the methanol plant will be able to produce 230,000 tons of methanol per day. Assuming the price of methanol at $230 per ton, the gas supply from Simenggaris will be able to generate around $575 million in methanol sales. (Godang/Alex)