PGN in talks to buy gas from ConocoPhillips

Ika Krismantari, The Jakarta Post, Jakarta

State-gas distributor Perusahaan Gas Negara (PGN) hopes to buy natural gas from ConocoPhillips' gas field in Grissik, South Sumatra, following the termination of the company's gas supply contract with Singaporean buyers.

PGN president director Sutikno said Wednesday the company was currently negotiating with ConocoPhillips and the Upstream Oil and Gas Regulatory Agency (BP Migas) to buy gas from the Grissik field.

He said the company offered to buy the gas from ConocoPhillips for between US$3.8 and $4 per million cubic feet per day, with no response so far.

Sutikno said the company planned to sell the gas to a Batam power company, which was currently suffering a gas deficit of 40 million cubic feet per day.

The government terminated the gas export contract with Singaporean firm Island Power (IP) in June, after the company failed to secure a pipeline connection with another Singaporean company, Gas Supply Pte. Ltd. (GSPL), a subsidiary of Temasek Holdings, within a period of time given by the government.

Under the agreement between the government and IP, Indonesia was to deliver 110 million standard cubic feet per day of gas to IP, over a period of 13 years ending 2014.

Under the plan, the gas from ConocoPhillips' gas field in Grissik would be transmitted via a 470-kilometer pipeline across Batam.

At present, Singapore still receives gas from ConocoPhillips and its partners' fields in Natuna. Like Singapore, Malaysia also has a contract for the supply of gas from the Natuna field. This contract runs for 20 years up until 2020.

BPMigas deputy chairman for marketing and finance Eddy Purwanto said in addition to PGN, several companies expressed an interest in buying gas from the Grissik field.

"We are still discussing it. We will see who makes the best offer," Eddy said to reporters after signing an anti-corruption pact with BPMigas executives.

Meanwhile, a subsidiary of the country's largest publicly traded oil company, PT Medco Energy Internasional, has agreed to sell natural gas (around 110 million cubic feet per day) to state-owned fertilizer producer Pupuk Iskandar Muda (PIM).

The gas would go to PIM's fertilizer plant in Nanggroe Aceh Darussalam under a seven-year contract beginning 2010.

Upstream Oil and Gas Regulatory Agency's chairman Kardaya Warnika on Tuesday said PT Medco Exploration and Production (E&P) would sell the gas to PIM at a price of US$5 per million British thermal unit (mmbtu).

He said the deal also included an agreement to raise the price, should the price of fertilizer in the global market exceeded $360 per ton.

PIM has been unable to operate to full capacity for the last three years due to the gas shortage.