PETRONAS SEEKING TO EXPLOIT NATUNA GAS FIELD

By Andi Abdussalam

Jakarta, March 14 (ANTARA) - Malaysia's oil and gas company Petronas is preparing a feasibility study on development of Indonesia's rich gas field, the Natuna D-Alhpa block in Riau Islands.

        Petronas President Director Tan Sri Dato Mohamad Hasan Marican met this week with Indonesian Energy and Mineral Resources Minister Purnomo Yusgiantoro to discuss possible cooperation with Indonesia on the Natuna gas field.

        The Malaysian company is interested in developing Natuna's gas field both in up and down stream areas, Petronas spokesman Non Saputri said. "We are interested in both areas. But we have to carry out a feasibility study in the first place," Saputri said.

        However, the Malaysian company does not yet know the production sharing system the Indonesian government is willing to use in the exploitation of the gas field with foreign partners.

        "We are waiting for the Indonesian government how much it would share with us on the output split. The Natuna block is Indonesia's asset and owned by the government," Saputri said.

        The Natuna D-Alpha block holds around 222 trillion cubic feet of gas reserves, of which about 46 Tcf are thought to be commercially recoverable

        Petronas is exploring the possibility of exploiting gas on the island after the Indonesian government decided to terminate its contract with ExxonMobil, and had asked state-owned oil and gas company Pertamina to take over from the US company and develop the block.

        The Indonesian government took the decision after negotiations with ExxonMobil failed. Talks with ExxonMobil have stopped on the offshore gas project - estimated to need total investment of about US$40 billion - due to disagreements on how to split gas output.

        Indonesia terminated the contract with Exxon on Natuna D-Alpha block in 2005 because after the contract had run for 20 years the American company was still unable to bring the field to a productive stage.

        ExxonMobil said its contract to develop the field lasts until 2009, but Indonesia says that its contract giving the US supermajor a 76 percent share has expired, Reuters reported recently.

        Pertamina said it would partner with other companies in developing Natuna gas field because the project needed a high technology and a big investment. Because of the need for a big investment, Pertamina is seeking to propose a consortium of companies to develop Natuna.

        The Indonesian government has asked Pertamina to submit a proposal on the development of Natuna D-alpha gas field.

        The proposal will be evaluated by a steering committee composing of the coordinating minister for economic affairs, the coordinating minister for political, legal and security affairs and the energy and mineral resources minister.

        Pertamina said it was still studying the form of cooperation it would offer to its partners in the development of the project. It will possibly propose a sliding scale scheme, which is based on production level and gas prices, in the production sharing agreement.

        "We are still studying it and waiting for its results because we do not want to make a speculative decision," Pertamina Corporate Secretary Sudirman Said affirmed.

        He said if the studies had been finished Pertamina would publish and provide details on the project proposal. The government has asked Pertamina to improve its proposal.

        Energy and Mineral Resources Minister Purnomo Yusgiantoro said Pertamina had yet to submit to the government an improved proposal on development of the gas field, especially on the needed funding and technology.

        "We asked Pertamina to improve its proposal but until now I have not yet received the improved version," the minister said here on Friday.

        Natuna D-Alpha field is a megaproject and is subject to various kinds of risks. This field is complex. To produce 1 billion cubic feet of gas a day for phase 1, it needs around US$15 billion of investment and about seven years time to develop.

        "This is a very complex problem and is a big project that involves many parties so that we have to wait for the results of the studies," Sudirman said meanwhile.

        A number of companies have offered a cooperation in the development of the Natuna gas field, including Total, Shell, Start Oil, Petronas, PTT Thailand and PetroVietnam.

        In the meantime, Britain has also expressed its interest. The British interest was expressed by a member of the British royal family, Prince Andrew, at a meeting with Energy and Mineral Resources Minister Purnomo Yusgiantoro last week

        "They want to increase their investment in Indonesia. They also want Shell to actively participate in Natuna," Purnomo said. The prince has come to Indonesia as his country's special envoy for international trade and investment affairs.

        Whether Petronas, Shell or other companies will get the chance to exploit Natuna's gas is not yet decided. Thus, production could not yet be expected soon.

        Pertamina has said that the Natuna D-Alpha gas field will not start production until 2015 and will need investment of about $15 billion to produce 1 billion cubic feet per day. (T.A014/A/HAJM/A/E002) (T.A014/A/A014/A/E002) 14-03-2008 20:44:18