Petronas aims to sign E. Natuna gas pact year-end: Report

Malaysia's Petroliam Nasional Bhd., or Petronas, is aiming to sign an agreement by the end of this year to facilitate gas development in Indonesia's East Natuna, Dow Jones reported on Wednesday.

"A general memorandum to agree to develop East Natuna will probably be signed by the end of the year," said Muri Muhammad, Petronas' vice president for gas business.

Indonesia's Pertamina has presented "a draft of the memorandum of understanding (MOU)," allowing Petronas to "study our gas reserves," Iin Arifin Takyan, Pertamina's upstream said.

"We'll hear from them (Petronas) hopefully, in a couple of weeks," said Iin, who was in Kuala Lumpur to present the MOU draft.

"We are looking at utilization of East Natuna gas from 2010," Muri said.

"Petronas is studying the possibility to buy gas from us (and) ... to join in upstream operations," Iin said, explaining Petronas' interest in gaining a stake in the D-Alpha gas block.

Aside from Pertamina, Petronas is also currently in discussions with other upstream players in Indonesia, Muri said. Muri also reiterated that there were concerns of high carbon dioxide content in D-Alpha gas reserves.

"East Natuna is a long term project where there is a huge gas reserves. Unfortunately, it has a lot of carbon dioxide...that may make it commercially very difficult reserve to develop," Muri said

ExxonMobil Indonesia Inc., a unit of Exxon Mobil Corp., holds 74% and operates the D-Alpha gas project in East Natuna. Pertamina holds the remaining 26% stake in the D-Alpha gas block.

As reported, Petronas has been eyeing 1 billion standard cubic feet a day of gas offtake, starting in 2010, from the Natuna D-Alpha gas block.

D-Alpha block has an estimated 42 trillion-46 trillion cubic feet of recoverable natural gas reserves, according to previous reports.

Despite a high content of carbon dioxide which inflates development cost, the estimated reserve is "still enormous," said an industry official in Indonesia. (*)