Exxon upbeat about Natuna gas buyers

Ika Krismantari, The Jakarta Post, Jakarta

The local unit of U.S. energy giant ExxonMobil expects to have no difficulties in finding buyers for Natuna gas if it is reappointed to operate the block, a senior company executive says.

ExxonMobil Indonesia's vice president for public affairs, Maman Budiman, told The Jakarta Post that the company had been in talks with buyers from Thailand and Malaysia before the government's call for the renegotiating of the gas block contract last year.

He said that prospective buyers from the two countries were willing to purchase 1 billion cubic feet of gas per day from the Natuna block at US$16 per million British thermal units (mmbtu), almost two times the current market price of about $9 per mmbtu.

"The higher price is due to the high costs involved in the development of the block, where the gas is estimated to have a 70 percent carbon dioxide (CO2) content" Maman explained.

He said that the high CO2 content had required a heavy investment not only to reduce the CO2 content to a level that would be acceptable to the market, but also to permit carbon-capture storage at the production facility.

Maman said he hoped the current negotiations with the government would be settled as soon as possible so the target of gas production at Natuna by 2014 could be achieved.

BP Migas (Upstream Oil and Gas Executive Agency) deputy chairman for marketing and finance, Eddy Purwanto, told the Post that the government planned to speed up the negotiations, even though the government and Exxon were still at odds over some issues.

The new negotiations on the development of the Natuna field began early this year following differences over the duration of Exxon's contract to develop the gas block.

The government argued that Exxon had lost its right to operate the block in 2005 as it had failed to make significant progress in developing it. This claim, however, was rejected by Exxon, which said that it had spent about $400 million on exploratory work.

The contract's last revision in 1995 stated that the company would be given the right to operate the block until 2009 on condition that it made significant progress in developing it.

To resolve the dispute, the government formed a special team, called the Natuna Block Management Committee, three months ago to renegotiate the contract with Exxon. The negotiations, which now also touch on other issues like the production split and the involvement of local companies, are still ongoing.

Natuna is believed to be the biggest gas field in Southeast Asia, with 46 trillion cubic feet of recoverable gas reserves.