Quest Petroleum: Significant price increases achieved by South Sumatran gas producers

(23 May 2012)--Quest Petroleum NL is pleased to advise that the state owned Indonesian energy company PT Perusahaan Gas Negara (PGN) recently announced that it has increased the price of gas for customers in West Java almost 50 percent following recent contract renewals with producers in South Sumatra. Gas produced under these contracts would be sold for an average of US$10.13 per million Btu in West Java. This is a price increase of nearly 49% from the previous contract rate of $6.80, driven by steadily increasing gas demand for commercial power generation in Java.

PGN has stated that the price increase is necessary as its own supply contracts have increased significantly, as PGN has been paying $5.60 per million Btu for gas from the Grissik field in the Corridor bloc in South Sumatra operated by US-based ConocoPhillips, up 202 percent. The price will increase to $6.50 per million Btu in 2014.

Similarly the price of gas from the Pagardewa field in South Sumatra operated by Pertamina EP has increased to $5.50 per million Btu, up 150 percent per million Btu. As with the gas supply contract from Grissik, the price for gas from Pagardewa will also increase to $6 per million Btu in 2013.

PGN also stated it faces difficulties in meeting supply obligations under existing sales agreements due to the problem of obtaining the gas from producers. PGN contracts reportedly reach 1,000 mmscfd however, they currently only receive around 800 mmscfd.

PGN?s subsidiary PT Transportasi Gas Indonesia pipeline capacity is currently only partially utilized.

Quest Petroleum Chairman Gus Simpson stated: ?These price increases, signaling excess demand for South Sumatran gas in Java, have positive implications for the economics of gas discoveries in the Ranau PSC, with contracted gas prices expected to be a minimum of $6.50 per million Btu from 2014 onwards.?(ends)