Pertamina tries to terminate E. Java gas contract with Enron

State oil and gas company Pertamina said on Wednesday that the company was trying to find ways to safely terminate gas supply contract with bankrupt US energy firm Enron Corp.

?We are trying to negotiate to terminate to gas supply agreement to enable us to develop Madura BD gas field to supply East Java gas market which is currently facing severe gas supply shortage,? said Siddick Natakusumah, Pertamina production sharing management directorate senior official on Wednesday.

In 1997, Enron through its 51 percent subsidiary P.T. East Java Power Corp. (EJPC) signed an agreement with Pertamina to supply up to 30 million standard cubic feet per day (MMCFD) of natural gas to EJPC?s 500 megawatt power plant under development in Pasuruan, East Java. The gas would be supplied from ExxonMobil-operated Madura BD field offshore of East Java in the Madura Strait. The power pant was originally scheduled to operate in 1998.

Enron?s partners in EJPC included Bambang Trihatmodjo, son of the-then president Soeharto and his crony Ibrahim Risjad.

By 1997 the Indonesian economy collapsed and Soeharto was overthrown. The resulting economic mess forced Indonesia to default on its payments for the Enron power plants.

The Enron power project was suspended indefinitely in September 1997, after the power purchase agreement had been signed and the gas contract was completed with Pertamina. Enron officials objected to the suspension because the final financial close on the power plant was reported to be only days away.

Since then, activities to construct gas facilities in Madura BD stopped.

Siddick said gas reserve in Madura BD reached 600 billion cubic feet and could supply East java market with the rate of 100 MMCFD.

?But with no contract termination with EJPC, Pertamina and ExxonMobil could do nothing. The gas is just lying there while East Java is facing supply shortage,? said Siddick.

Siddick, however, did not reveal the negotiation progress or when Pertamina expected contract termination deal could be reached.

ExxonMobil, the Madura BD operator hold 68.6 percent working interest in Madura BD block, while Canadian oil company Husky Oil holds the remaining 31.4 percent.(godang/robert)