US$7 billion required for gas development in Papua, C. Sulawesi: Report

Indonesia will require more than US$7 billion for gas development which will lead to new liquefied natural gas facilities in Papua and Central Sulawesi by 2010, an Indonesian industry official told a seminar in Singapore on Monday, Dow Jones newswire reported.

John Karamoy, chairman of the Board of Commissioners at oil and gas firm PT Medco Energi International, said at the Asia Upstream 2002 conference Indonesia currently has 104 trillion cubic feet of proven and probable natural gas reserves that haven't yet been committed. These gas reserves are spurring the expansion of the Bontang LNG plant, construction of new liquefaction facilities to tap gas resources in Central Sulawesi and Papua and the development of integrated pipeline systems.

An estimated 46 trillion cubic feet of gas reserves in East Natuna's D-Alpha block will require substantial investment, and development is pending a long-term sale contract to Malaysia, he said.

But wellheads and gas production platforms aside, the cost of constructing gas liquefaction facilities, gas distribution infrastructure, and LNG shipping facilities alone will cost more than $7 billion over the next eight years.

Expanded gas liquefaction facilities in East Kalimantan and new LNG facilities planned for Papua and Central Sulawesi are expected to come online 2005-2007, Karamoy said.

Indonesia's third LNG center will be based at Tangguh, Papua, where natural gas reserves are pegged at 18.3 trillion cubic feet. BP PLC (BP) has a 50 percent sake in the Tangguh project, and led marketing efforts in LNG tender sale to China. Construction at Tangguh is slated to start in July this year.

In Central Sulawesi, gas reserves estimated at 6 trillion cubic feet "allows for a fourth LNG center," Karamoy said. Gas operations in Central Sulawesi are currently controlled by Medco and Pertamina. But Medco is unlikely to partake in the development of LNG facilities, said Karamoy.

Gas in Central Sulawesi will be developed to meet incremental local demand from mining operations and power generators in Sulawesi, Karamoy said.

While Indonesia's domestic gas demand is expected to more than double by 2010, further utilization of natural gas is hindered by cheaper, subsidized fuels and a lack of an integrated Sumatra-Java gas pipe infrastructure, Karamoy said. (*)