Indonesia Approves Gas Shift for Domestic Needs
Indonesia's oil and gas regulator BPMigas has offered 110 million standard cubic feet per day (mmscfd) in additional gas supply from the Grissik field in South Sumatra, operated by US-based ConocoPhillips, to state gas distributor PT PGN.
BPMigas spokesman Gde Pradnyana said that the gas was previously allocated to compensate for a supply shortage to customers in Singapore.
He added that the amount of gas delivered to customers over the past three years was below the agreed amount.
“Our priority is to provide sufficient gas supply for domestic customers therefore we offer the gas to PGN or state electricity company Persero (PLN), but PLN rejected because the company doesn’t want to pay the compensation,” he told reporters at his office in Jakarta on Tuesday evening.
Gde said that the agreement stipulated that the gas could be taken by other buyers, but the new buyers had to pay compensation to the Singaporean customer.
“We don’t know the amount of the compensation yet because the customer has not submitted a claim,” he said.
The gas sales contract with Singapore is slightly different from the common contract with domestic users, particularly in terms of its strictness.
The amount of gas delivered to the customers must be exactly the same as stipulated in the contract. If there is a lack of supply, the supplier must compensate the amount in the future.
“The customer enjoys certainty in the amount of gas supplied by the gas producer. That is why the price is usually higher,” Gde said.
The price of gas channeled to Singapore reached between US$12 and $15 per million British thermal units (mmbtu), he added.
Gde revealed that the gas supply contracts between PGN and gas producers were usually looser. The contracts did not oblige the producers to supply gas in certain amounts and PGN would only get the amount of gas that was available.
“PGN can take the gas if the gas is available. Therefore, the price is very cheap. Even, in some contracts, the price is only $1.80 per mmbtu,” he said.
The contract with Singapore will expire this month, so PGN has to decide quickly whether to take the gas or not, according to Gde.
PGN investment planning and risk management director Wahid Sutopo said that his company was interested in buying the additional gas supply, saying that the company had conveyed its interests to BPMigas.
“About the price, we’ll discuss that later, but we are okay if the price is higher than our usual buying prices,” he said.
Currently, the production of the South Sumatra corridor block is around 1,000 mmscfd. Of that, PGN gets 412 mmscfd.
According to PGN’s 2010 financial report, the country’s total gas demand reached 4,861 mmscfd, comprising 2,093 mmscfd for electricity, 1,247 mmscfd for the fertilizer industry, 965 mmscfd for the metal industry, 246 mmscfd for the paper industry, 79 mmscfd for the glass industry and 100 mmscfd for other industrial sectors.
As of 2010, PGN could only supply 824 mmscfd — around 16 percent of the total demand.
In the first quarter of this year, the company delivered only 780 mmscfd.
Source: Jakarta Post