Total says domestic gas should match export prices
Thursday, July 20 2006 - 06:40 AM WIB
?Total is supporting government?s plan to sell gas from East Kalimantan to Java. But the pricing should match export price,? Total E&P Indonesie Corporate Communication Manager Ananda Idris said.
The government is drafting a policy that would shift the nation's gas output from export markets to domestic users. This may mean that the Bontang LNG plant's export contracts due in 2012 amounting to 12 MTPA might not be extended. Traditional LNG buyers, especially Japanese buyers, have been lobbying Indonesia hard to get at least some part of the contracts extended.
BPMIGAS Chairman Kardaya Warnika said earlier said that East Kalimantan gas reserves would not be sufficient to meet all demands including those arising from LNG contract extensions, clients of the planned East Kalimantan-Central Java pipeline, fertilizer firms, power plants and industry. ?The government has to make decision to allocate gas supply (from East Kalimantan)," he said.
Downstream regulatory body BPH MIGAS this week selected PT.Bakrie& Brothers, a company controlled by tycoon cum cabinet minister Aburizal Bakrie, to win the right to develop the 1,100-km pipeline that would transport East Kalimantan's gas to Java. The project is worth more than US$1 billion. The company?s president had said it would soon commence talk with Total, the only East Kalimantan gas producer which still has spare gas reserves. The pipeline will charge toll fee of $0.84 per MMBTU.
Mahakam PSC has currently 13 TCF of uncommitted gas, which is originally designated to accommodate Japanese buyers? contract extension.
Currently, natural gas sold to domestic companies are priced below US$4 per MMBTU at consumers? gate, with fertilizer firms paying at a much lower price. Meanwhile, LNG currently sells for more than US$9 per MMBTU FOB.
Total is investing more than US$1 billion to develop its Sisi-Nubi and Tunu gas fields, which are intended to keep its production plateaued at 2.6 BCFD. The fields would come onstream next year with a peak production of 400MMCFD. ?Total is asking adjustment in domestic price to protect investment return should Mahakam PSC be directed to supply gas to domestic market,? he said.
Total is currently supplying more than 70 percent of Bontang LNG plant gas requirement. Other suppliers are Vico Indonesia and Chevron Corp. Vico's production is dwindling due to reserves decline, while Chevron announced early this week that it would not no longer be able to meet gas supply commitment to Bontang due to insufficient reserves. Shortage of gas suplies from Vico and Chevron has forced Bontang LNG to cut LNG shipments to its East Asian buyers by around 15 percent this year. The cut is seen more severe in 2007-2008.
An industry source contacted by Petromindo.Com said that Total?s wish to get high prices for its gas that would be supplied through Bakrie's pipeline would be almost impossible to meet. If Total wants US$8-9 per MMBTU for its gas plus a toll fee of 84 cents, then landed gas prices in Java would be around 10 per MMBTU, which is too expensive, compared to the piped gas from Sumatra that would be sold at around $4 per MMBTU, said the source. (godang)