BPMigas Says Senoro’s Domestic Obligation Should Be Replaced

The Jakarta Globe, February 13, 2009 

PT Pertamina may have to find 500,000 metric tons of liquefied natural gas from other sources to make up for the PT Donggi Senoro LNG that was supposed to have supplied the domestic market, Abdul Muin, deputy chairman of upstream oil and gas regulator BPMigas, said on Friday. 

Oil and gas companies are required to set aside 25 percent of their annual production for the domestic market after production commences, but the gas produced by the Donggi Senoro plant is expected to be priced at a level that would be too high for the domestic market. 

The plant, let by Mitsubishi Corp., is expected to be smaller than similar plants, and therefore more expensive proportionally. 

It is to be supplied by natural gas extracted from the Senoro and Matidok fields, both located in the Senoro block off Central Sulawesi Province. 

“Pertamina can source the gas from any of its other fields across the country,” Abdul said. “Pertamina is fully integrated with all of its subsidiaries so that if one of them is unable to meet its obligations, it can take the gas from another source.” 

Separately, Raden Priyono, the chairman of BPMigas, told members of the House of Representatives’ Commission VII on Wednesday that the Donggi Senoro LNG project was expected to produce 2 million tons of gas a year, starting in 2013. 

Priyono also said that Pertamina had not yet decided where it would source the gas to make up for the Donggi Senoro plant’s domestic market obligation. 

Energy analyst Widjajono Partowidagdo said on Friday that Indonesia in reality had abundant gas potential, but oil and gas firms were not interested in developing it due to the artificially low domestic prices set by the government. 

“Who wants to supply the domestic market?” he said. “The government makes oil and gas companies sell LNG at home at prices that mean they are deprived of a margin. 

“At the very least, they should be able to make some profit so as to encourage the development of new gas projects,” he said. 

Pertamina and PT Medco Energi Internasional Tbk, the operators of the Senoro, have drilled five production wells and are preparing to drill two more. Initial gas production from the block is expected to reach 227 million standard cubic feed per day.