Govt approval for East Natuna postponed again

JAKARTA. A consortium of oil and gas companies waiting for government approval of their proposal to develop the gas-rich East Natuna field in the South China Sea this month must hold their horses as a top official has hinted at a postponement until next year.

Deputy Energy and Mineral Resources Minister Rudi Rubiandini told The Jakarta Post on Wednesday that the government was still reviewing the business consortium’s proposal over the mega-project and it was “highly unlikely that the study will be finalized this year”.

The government’s approval of the principal of agreement (PoA) signed by the consortium members — state-owned oil and gas firm PT Pertamina, US-based ExxonMobil, France’s Total SA and Thailand’s PTT Exploration and Production (PTT EP) — has already been postponed several times. The PoA was initially signed by the consortium’s members in August last year when Malaysia’s Petronas was still in the consortium. Petronas was later replaced by PTT EP earlier this year.

The PoA, which relates to the development of the East Natuna field, formerly known as the Natuna D-Alpha block, is an essential step before the production sharing contract (PSC) for the block can be signed. Initially, the Natuna PSC was due to be signed in October 2011 before it was postponed to mid-2012. It was then postponed again to November this year and, finally, to Dec. 10. The PoA must be approved by the finance minister.

The East Natuna gas field is expected to begin production in 2020 with peak production estimated to reach 4,000 million standard cubic feet per day (mmscfd) of gas over a time span of at least 20 years before supplies begin to decline.

The East Natuna block has total proven reserves of 46 trillion cubic feet (tcf), making it the largest gas reserve in Asia. However, with a high level of carbon dioxide content it will take several years to study how to manage the carbon dioxide waste.

This situation encouraged the consortium members to ask for a number of incentives or “special treatment” from the government in order to ensure that the companies could plan their investments for the block.

The consortium members requested the contract be extended from the normal 30 to 50 years plus a five-year tax holiday and 150 percent investment credit, among other requests in the proposal. Separately, Finance Minister Agus Martowardojo said his office had prepared an offer package on the consortium’s proposal and, although he declined to go into detail, most of the items in the package met the expectations of the Natuna East investors.

He added, however, that the government expected the gas price from Natuna to cost around US$13 to $15 per million metric British thermal units (mmbtu) instead of the $11 per mmbtu as written in the proposal. (Amahl S. Azwar and Hans David Tampubolon/ The Jakarta Post)