REPUBLIKA.CO.ID, JAKARTA - The plan to sign a cooperation contract for the East Natuna gas block in the Riau Islands is postponed from this month until next year, according to Deputy Minister for Energy and Mineral Resource Rudi Rubiandini. Discussions on the contract would unlikely wrapped until the end of this year, he said on Tuesday.
Rudi said the decision on development of the East Natuna Block lied on the hands of the Energy and Mineral Resources Minister Jero Wacik. "Therefore, the signing has to wait until the minister makes his decision," he said.
The date set for the signing of the contract was already rescheduled several times from 28 October, 2011 to mid 2012 and then to Nov. 2012 and lastly to late December. The East Natuna consortium led by state oil and gas company PT Pertamina already extended the principal of agreement (POA) from Dec. 9, 2012 until time yet to be set. It was already extended earlier from late November 2012.
Pertamina President Karen Agustiawan said POA will be extended until the contract is signed, adding, "I cannot give a fixed date."
She said East Natuna block was a pioneer project with complicated upstream activities, therefore, there are a lot of things that need to be carefully considered. She expects the ministry of finance will approve the fiscal studies submitted by the consortium. She said domestic consumption would be the priority in disposing of the gas production from East Natuna.
The incentive proposal
On 19 August 2011, POA on explorations and exploitations of East Natuna block was signed by the Oil and Gas Director General Evita Legowo representing the government and Pertamina and other members of the consortium , ExxonMobil, Total EP Indonesie, and Petronas Carigali. Later, Petronas quit and was replaced by PTTEP of Thailand.
Pertamina as the operator and Exxon hold a 35 percent participating interest each, Total and PTTEP hold 15 percent each. The consortium asked for a number of incentives in its proposal to the government, before it could start work.
Among the incentives proposed by the consortium included extension of the contract from 30 years to 50 years and change in production split from normally 70:30 in favor of the government to 38:62 in favor of the consortium with first tranche petroleum (FTP) abolished from normally 10-20 percent, and tax holiday for 5 years.
The incentive proposal is still being studied by the ministry of finance. Development of the East Natuna Block, believed to hold one of the world`s largest gas reserves is estimated to cost 24 billion USD.
The block is estimated to have a reserve of 222 trillion cubic feet of gas with a 70 percent content of CO2 that has to be separated with high cost. Proven reserves, therefore, are estimated at only 46 trillion cubic feet. It is expected to turn out 1,200 million cubic feet of gas per day in 30 years.
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