BPMigas may build petrochemical facility

To increase downstream gas supplies for local industrial use, upstream oil and gas regulator BPMigas is looking to take up part of the gas reserves in the Tangguh gas field operated by British energy giant BP in order to supply a new petrochemical facility.

BPMigas chairman Raden Priyono said Tuesday on the sidelines of an international gas conference that it planned to use up to 3.7 trillion cubic feet (TCF) of uncommitted gas reserves from the Tangguh field to help supply fertilizer and petrochemical plants.

The reserves form part of the existing 14.4 tcf of proven gas reserves in Tangguh, located in the Bintuni Bay area in Papua.

“BP will drill to prove the existence of the reserves by the end of 2009,” Priyono said.

If the results are positive, the government will then build a petrochemical facility, including new fertilizer plants in Papua.

This project will be carried out as part of BP’s plan to build a third LNG gas plant unit, or gas train, for LNG exports.

Currently, BP has two trains operating in the region with a total capacity of 7.6 million tons of
LNG per annum.

BP has said the first gas would be ready for shipment in April, although the government is currently negotiating with Chinese buyers to increase the selling price, which was set relatively low under the initial contract.

Having secured orders from South Korea, China and the US, BP still plans to build additional trains to tap the vast gas reserves in the region.

It is also committed to supply part of the gas for downstream domestic market use.

Tangguh will sell LNG to overseas buyers — China’s Fujian, South Korea’s K-Power and Posco and to Sempra Energy on the west coast of Mexico.

Joko Harsono, BPMigas deputy chairman for fi nance, economy and marketing, said the plan to set up these petrochemical facilities was first aired after Vice President Jusuf Kalla’s visit to the Tangguh plant last December.

Kalla had requested BPMigas to build a petrochemical industry facility in the region to meet the increasing demand for fertilizer in the country.

The demand for fertilizer is expected to increase to 7 million tons this year.

The Tangguh gas field is being developed by a consortium of BP Plc, (37.16 percent), MI Berau (16.3 percent), CNOOC (13.9 percent), Nippon Oil (12.23 percent), KG Berau/KG Wiriagar (10 percent), LNG JapanCorporation (7.35 percent) and Talisman (3.06 percent).

Priyono also said the government is looking for more gas supplies for industrial needs in other gasrich projects like Masela in the Timor Sea.

He did not elaborate further whether the gas block operator, Japan’s Inpex, is required to allocate some of its gas reserves for domestic demand and local industry.

BPMigas expects the new block to start production by 2014 at a rate of 4.5 million tons per annum.

Indonesia is expected to see a rise in gas demand by 2.8 percent annually, reaching 6 billion cubic feet per day by 2020.

Source: The Jakarta Post

Pertamina, Medco to ink $16b deal for Japan

State oil and gas company PT Pertamina and publicly listed PT Medco Energi Internasional are due to ink a gas deal worth US$16 billion with a consortium led by Japanese diversified business giant Mitsubishi Corp.

The consortium will turn the gas in its Senoro plant into liquefied natural gas (LNG) for shipment to Japan. Mitsubishi has a 51 percent stake in the consortium, while Pertamina and Medco hold 29 and 20 percent, respectively.

Pertamina vice president Iin Arifin Takhyan said on Tuesday the planned signing on Jan. 22 was a follow up to a deal secured in August, in which Pertamina and Medco would supply 17 trillion cubic feet of gas for 15 years to the consortium.

The gas will be taken from the Senoro-Toili block, which is jointly owned by Pertamina and Medco, and the Donggi block, which is wholly owned by Pertamina.

The LNG plant has a total capacity of 2 million tons per annum and is expected to start producing by 2013 for export to Japanese companies Chubu Electric Power Co. and Kansai Electric Power Co.

Iin said the gas price would be determined under a formula where the price is set to trail oil price movements.

He did not elaborate further.

Medco Energi president director Lukman A. Mahfoedz said the consortium would decide the final investment required on the LNG plant project in February at the latest, before seeking loans to finance it.

Indonesia has three LNG plants; Bontang in East Kalimantan with a capacity of 18.5 million tons per year, Arun in Nangroe Aceh Darussalam with 12.5 million tons annually, and Tangguh in Papua with 7.6 million tons annually.

The Senoro plant will be the country’s fourth LNG plant, to be followed by an expected fifth one at the Masela project in the Timor Sea, where Japan’s Inpex is the operator.

Indonesia may produce about 20 million tons of LNG this year, excluding Tangguh.

Pertamina president director Ari H. Soemarno, as quoted by Bloomberg, said the gas price to Japan, linked to import costs of Japan’s crude oil basket, known as the Japan Crude Cocktail, would be $9 to $10 per million British thermal units based on crude oil at $100 a barrel.

US gas futures in New York were at $4.676 per million Btu at 3:53 p.m. Singapore time, said Bloomberg.

Chubu, Japan’s third biggest power utility, forecasts LNG purchases to stay unchanged this fiscal year as global recession cuts electricity generation in Japan, said Bloomberg.

The utility, which supplies power to Toyota Corp., may import 10 million metric tons of the cleaner-burning fuel in the year to March 2010, Yuki Kakimi, the company’s general manager of fuels, said.

“LNG demand will be sluggish for several years,” Kakimi said as quoted by Bloomberg. “LNG demand in the US and Europe will not be as strong as projected.

Source: The Jakarta Post

Local users will get more gas

The government will prioritize gas supply for domestic consumption rather than for overseas buyers in the coming years, a minister says.

Acting Coordinating Minister for the Economy Sri Mulyani Indrawati said during an international gas conference Wednesday that demand for the fuel in the country was expected to rise in line with growth in local industry and a growing middle class.

While being aware of a possible dilemma for gas companies in meeting demand for overseas buyers, Mulyani believed the government would have no other option than to prioritize the national interest.

“But I assure you that the tension (between exporting and supplying the domestic market) will not subside. It will get more tense,” she said, adding gas had been selected as a primary source of cleaner and cheaper energy to replace oil.

Hence, she urged gas producers to maintain production or even to produce more gas to meet demand for local and overseas markets.

Data from the Upstream Oil and Gas Regulator BPMigas shows that demand for gas will rise steadily at a rate of 2.8 percent annually, reaching 6 billion cubic feet per day by 2020. In 2007 demand only stood at 4.2 billion cubic feet per day.

In Java, where most industries are based, demand will increase by 4.9 percent annually, reaching 4.1 billion cubic feet per day by 2020.

This has left the government with no other option than to start thinking of allocating gas supplies to meet domestic needs since the bulk of gas production is now exported.

This policy is likely to affect overseas buyers who rely on gas supply from Indonesia, especiallyJapan and South Korea. Indonesia, the world’s third largest liquefied natural gas (LNG) exporter, is facing dwindling gas output due to depleting reserves, and lacks an extensive distribution network to help meet local demand.

The government has targeted gas production to reach 7.32 billion cubic feet per day this year, lower than last year’s production of 7.9 billion.

The share of total gas production used for domestic needs has increased significantly from 29.6 percent in 2002 to 49.5 percent in 2008, according to BPMigas.

BPMigas chairman Raden Priyono has said the government will rely on a number of big LNG projects in several places across the country to help increase total gas production in the coming years.

These include the Tangguh LNG plant in Papua, the Senoro LNG plant in Central Sulawesi as well as the development of the Masela gas block in the Timor Sea.

However, those projects are not sufficient to guarantee adequate local supply, as the present lack of a clear regulatory framework fails to ensure that gas producers will shift their production from exports to meeting domestic demand, energy analyst Pri Agung Rakhmanto said.

“We need a concrete regulation forcing supply for domestic market,” he said, adding that an article in the Oil and Gas Law requiring a domestic market obligation had not been enforced and many existing contracts did not comply with the law.

“The government should have revised those contracts,” he said.

He also suggested the government should intensify and promote the construction of downstream gas distribution infrastructure.

A consortium led by state oil and gas distributor PGN is in the process of building an LNG receiving terminal in Banten, with a total capacity of 3 million tons per year. The terminal is expected to start up operations by 2012.

Aside from infrastructure, pricing schemes should also be adjusted to make the buying price for domestic markets competitive with exports.

PGN expects robust sales in 2009 on demand from power producers

State gas distributor PT Perusahaan Gas Negara (PGN) expects sales to grow by 33 percent next year on rising demand from power producers.

Sales volume is expected in 2009 to increase to between 700 and 800 million cubic feet per day (MMScfd), up from 600 MMScfd forecast for the end of this year, PGN president director Hendi Prio Santoso told reporters Wednesday.

"Demand from power producers is very high. If we can manage to fulfill this demand we are optimistic for next year, despite the crisis," Hendi said.

"But, we need further evaluation to examine how big the crisis will impact upon the industry and how long it will last," he said, adding that in the meantime PGN would focus on meeting demand from power producers -- its biggest customers.

Currently, PGN hold contracts to supply 260 MMScfd to power producers.

Despite the forecast growth in demand, Hendi said PGN would probably not increase its gas price. "We may maintain current price levels, unless we receive new gas supplies at higher cost."

PGN currently sells gas at an average price of $5.5 per million British thermal units (mmbtu) and buys gas at a price of $3.9 per mmbtu.

Riza Pahlevi Tabrani, PGN finance director, said capital expenditure for next year could reach $200 million financed by a mixture of internal budget and loans, the latter mostly from the Japanese Bank for International Cooperation and the World Bank.

"Most of it will be used to develop the pipeline transmission network," Riza said. PGN finished 1035 kilometers of transmission and distribution pipelines in August this year. The pipeline system has a total capacity of 970 MMScfd.

PGN is one of the state enterprises obliged by the government to buy back their shares to benefit from the large fall in stock prices to help improve liquidity.

Hendi said PGN has so far only spent Rp 2.5 billion buying back its shares from Rp 400 billion allocated for that purpose.

PGN booked Rp 2.04 trillion in net profits in the third quarter this year, up 56.8 percent from Rp 1.30 trillion in the same period last year.

Source: The Jakarta Post

Govt: no price cut for diesel fuel, kerosene

The government said Sunday it would not cut the prices of subsidized diesel oil and kerosene, currently at Rp 5,500 (46 US cents) and Rp 2,500 a liter, respectively, despite cuts in gasoline prices starting Monday.

Even though the price of subsidized gasoline will be lowered to Rp 5,500 from Rp 6,000 a liter from Monday, prices of diesel fuel and kerosene will remain the same, head of the Legal Affairs and Public Relations Bureau at the Energy and Mineral Resources Ministry Sutisna Prawira said in a press release Sunday.

The price of subsidized gasoline is being cut because of a slump in global crude oil prices to below US$60 a barrel in the past month. The price hit $147 a barrel in mid-July.

But the price cut may not last long, as the energy and mineral resources minister will continue to monitor and evaluate changes in global prices.

Critics have urged the government to lower the price of subsidized diesel fuel by Rp 500 a liter to help boost the economy. (dre)

Source: The Jakarta Post

Pertamina moves to acquire Verenex's Libya oil field

PT Pertamina is moving ahead with an expansion plan, with the state oil and gas company in talks with Verenex Energy Inc. to buy the Canada-based firm's stakes in an oil field in the Ghadames Basin, Libya.

The field, known as Area 47, is operated by Verenex and Indonesia's largest publicly listed oil company, PT Medco Energi, with each holding 50 percent of the interest.

"Verenex may pull out from the block. As the drilling has been done, we think why not to enter into this block," said Pertamina's upstream director Karen Agustiawan Friday.

Karen said Area 47 may begin production in 2011 with an initial production estimated at 50,000 barrels of oil per day.

She added that the block, if the talks were successful, would be the third Pertamina block in Libya. "We already own two blocks in Libya and are looking forward to see Libya as one of our bases overseas."

Medco and Verenex won rights in 2005 to explore the basin for 30 years. The area contains about 2.15 billion barrels of oil equivalent according to a best estimate study as of Sept. 20, Medco said on Nov. 7, as reported by Bloomberg.

Libya, a member of the Organization of Petroleum Exporting Countries (OPEC), has 41.5 billion barrels in proven oil reserves and produced more than 1.75 million barrels a day in October.

Karen said Pertamina has yet to decide the portion of the stakes it would acquire. "We are still in talks with Verenex. We don't know yet whether we will enter the block alone or with partners," she said.

Meanwhile, Pertamina is also getting good news on the domestic front.

The company, through its subsidiary, PT Pertamina EP, is developing an oil and gas well in Pondok Tengah, Bekasi, West Java.

In an early trial on Nov. 24, PT Pertamina EP extracted 3,447 barrelsof oil per day and 6.7 million cubic feet gas per day from the well, PT Pertamina EP's president director Tri Siwindono said.

Pertamina expects to produce an average 154,000 barrels of oil per day in 2008, up from 143,000 barrels per day in 2007.

Source: The Jakarta Post

Monday, December 1, 2008 6:38 AM Be a member & get the benefits! Register or login UT prepares to buy two more coal mines

PT United Tractor, the publicly listed heavy equipment distributor and coal mining company, was on track Friday to finalize acquisition of two coal mines in Central Kalimantan for around US$45 million, says an executive.

"We are now completing the due diligence process, hopefully we can announce the acquisitions by next month or January next year," said finance director Gidion Hasan.

Gidion, however, refused to mention the name of the companies he was dealing with as the due diligence process was still underway.

The coal mines in question, according to Gideon, met the company's strategic plan criteria only to acquire mines which had more than 5 million tons of reserves of medium to higher quality coal, with more than 5,800 kcal/kg (calories per kilogram) calorific value.

"We have $45 million on standby to wrap up the deal."

Currently, the company operates a coal mine in South Kalimantan with annual production of three millions tons of coal under its subsidiary PT Pamapersada Nusantara, which has 13 million tons of reserves and contributed Rp 2.8 trillion ($233 million) in sales during the January-September period.

Its other coal mine, located in Kapuas, Central Kalimantan, has 40 million tons of reserves of coal and is expected to start production in 2009.

In the first nine months of 2008, United Tractors generated Rp 21.1 trillion in sales revenue, up by 59.4 percent from 13.2 trillion from the same period last year.

It managed to book Rp 2.1 trillion in net profits, an 88.7 percent increase from last year.

The mining sector is expected to bolster the company's revenue after forecasting that construction machinery sales would probably decrease significantly.

"Next year our sales should be backed up from other sectors, like mining and the parts and services business," Gidion said.

The company's sales revenue in the first nine months of 2009 was made up from sales of construction machinery (47.6 percent), mining contracting (39.2 percent) and coal mining (13.2 percent)

United Tractors is 59.5 percent owned by PT Astra International with the investing public controlling the rest. (hwa)

Source: The Jakarta Post