Citing Shortage, Pertamina Unit Says it Will Stop Selling Natural Gas to PGN

Jakarta Globe, Yohanes Obor, February 14, 2010

PT Pertamina Hulu Energi said on Sunday that it would no longer be able to supply natural gas to state-owned PT Perusahaan Gas Negara under an existing contract because of the depletion of its reserves.

The move is further evidence of the country’s difficulty in securing natural gas for domestic industry.

Pertamina Hulu Energi spokesman Ali Mundakir told the Jakarta Globe that the company would not be able to meet its commitment to provide PGN with 65 million standard cubic feet per day because its supplies were now “limited.”

PGN corporate secretary Wahid Sutopo was quoted by news portal Detikfinance.com on Sunday as saying the company would be unable to meet the needs of some of its customers because of the cancellation of the contract.

“The termination of the gas-sales contract will impact our ongoing operation, including 165 industrial, 81 commercial and 10,200 household customers in Serpong, Banten, and surrounding areas,” Wahid was quoted as saying.

Pertamina Hulu Energi operates the Offshore North West Java gas block, a concession that stretches from Cirebon to the Thousand Islands in Jakarta Bay.

Ali said the gas sales contract with PGN had expired on Dec. 31 but had been extended until Feb. 28.

However, he said Pertamina Hulu Energy, a unit of state-owned oil and gas company PT Pertamina, and upstream oil and gas regulator BPMigas had urged PGN to seek other gas suppliers since July.

Ali said the ONWJ block was now producing 200-220 mmscfd gas. He said Pertamina Hulu Energy had committed to supplying 100 to 150 mmscfd of gas to state electricity company PT Perusahaan Listrik Negara and 70 to 100 mmscfd gas to state fertilizer company PT Pupuk Kujang due to a ministerial decree ordering that the fertilizer industry and power generation take priority.

“We are now only able to commit to supplying gas to PLN and Pupuk Kujang,” he said.

The manager of the ONWJ block, Ignatius Tenny Wibowo, in December said output at the block would fall 3.2 percent this year to because most existing wells had matured.

ONWJ block was fully acquired in June 2009 from British Petroleum through its BP West Java subsidiary.

Ignatius said production at ONWJ’s new fields would be accelerated next year, and would add 40 to 50 mmscfd to total production.

Pertamina and PGN this month signed an agreement on the formation of a joint venture company to build three floating liquefied natural gas terminals.

The LNG terminals are aimed at helping the country meet rapidly growing domestic demand for gas for generating electricity and the fertilizer and manufacturing industries.

However, the country is still likely to import gas next year to meet demand. The government confirmed this month that Pertamina is in talks to import gas from Qatar.