Natuna negotiations nearing completion, energy minister says

Ika Krismantari, The Jakarta Post, Jakarta

Negotiations between the Indonesian government and U.S.-based energy giant ExxonMobil, on the extension of the company's contract in the Natuna D-Alpha gas block, are nearing a conclusion with the former set to secure a larger share of the production split, a minister says.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said Wednesday the negotiations had "progressed well and were on track for completion."

The remarks confirmed similar statements conveyed to The Jakarta Post by a source close to the negotiations, who said the two parties were now finalizing the wording of the agreement.

Purnomo did not mention when exactly the deal would be finished, but did say the discussions had reached an agreement on the division of production.

He said the government were set to secure a larger portion than under the existing contract whereby Exxon gets 100 percent of the production split, but did not mention specific figures.

"The split will also depend on the price we are offered from potential buyers. We are currently negotiating with neighboring countries; Malaysia, Thailand and Vietnam; which have showed an interest in the gas," Purnomo said.

The government said previously that gas derived from the Natuna D-Alpha block could be sold for US$16 per million British thermal units (mmbtu) -- far higher than the market price ($9 per mmbtu) due to the high costs involved in the development of the block.

Despite the high price, energy companies from neighboring countries such as Petronas and Petrovietnam had conveyed an interests to buy the gas.

Purnomo said, in the negotiations the government were also seeking a bigger participating interest in the block for state oil and gas firm PT Pertamina, which stood at 26 percent.

The Natuna block, which has been reported to have the biggest natural gas reserve in Southeast Asia, is estimated to have some 46 trillion cubic feet of recoverable gas reserves.

The block has been the subject of a dispute between the government and the American oil giant for the last two years.

The administration set up its negotiating team in early 2007 to discuss terms and conditions for the block with Exxon.