PGN confirms gas negotiation with ConocoPhillips

State gas distribution agency PGN on Tuesday confirmed that it had held talks with US oil, gas major ConocoPhillips to buy and to transport the latter?s gas from Corridor block in South Sumatra to West Java.

?Negotiation with ConocoPhillips to transport around 350 to 400 million standard cubic feet per day (MMCFD) of natural gas to PLN?s power plant in Jakarta. On top of that PGN will also purchase up to 50 MMCFD from ConocoPhillips,? said PGN president WMP Simandjuntak. He said gas would be transported along with Pertamina?s gas from Pagar Dewa, also in South Sumatra through PGN?s South Sumatra-West Java pipe network, which will be completed in 2006.

PGN had just secured some US$400 million in soft loan from Japan Bank for International Corporation (JBIC) to finance the construction of 480-km Pagar Dewa-Cilegon pipeline that would connect South Sumatra and West Java. The pipeline is constructed to anticipate increasing gas demand in West Java.

Simandjuntak said the negotiation with ConocoPhillips regarding toll fee had ?progressed? and hoped that deal could be reached within months. A source at BP Migas, Indonesia?s upstream oil and authority said earlier that ConocoPhillips and PLN had reach ?substantial progress? and deal could be sealed within months.

PLN will use the gas to fuel its Muara Tawar, Muara Karang and Tanjung Priok power plants.

The deal will PGN cancelled ConocoPhillips? earlier plan to build its own dedicated sub-sea pipeline to transport its gas from South Sumatra to West Java.

Simandjuntak further said PGN would need another US$ 200 million of investment to finance the construction of Grissik-Pagar Dewa pipeline to copnnect ConcoPhillips Corridor Block to the pipeline network and from Balaraja to PLN?s power plants. He said PGN had asked JBIC to finance the project through semi-soft loan. He expected decision would be given in one-year time.

He also said negotiation with state oil and gas company Pertamina had been completed and sales and purchase agreement will be signed within weeks? time. Under the deal Pertamina will supply up to 250 MMCFD of gas starting from 150 MMCFD in 2006 for 20 years from its Pagar Dewa gas fields. PGN will pay average price of US$ 2.3 per MMBTU throughout the lifetime of the contract. (alex/godang)