At least 25% of Donggi gas may go to the domestic market

Alfian and Aditya Suharmoko, The Jakarta Post, Jakarta | Fri, 06/04/2010 12:25 PM

Indonesia may allocate at least 25 percent of gas from Donggi and Matindok fields to the domestic market after years of protracted debate on supply allocations.

The recommendation was made by Vice President Boediono during a recent meeting with economic ministers, Energy and Mineral Resources Minister Darwin Zahedy Saleh said in a text message sent Thursday.

"Vice President *Boediono* recommended that at least 25 percent of the gas be allocated to the domestic market," Darwin said.

However, he added, the recommendation had not been the government's final decision as the ministry was still studying the matter.

"We are still evaluating the matter to find the best and the most realistic option for the country," Darwin said.

However, Coordinating Economic Minister Hatta Rajasa said the government had reached the decision on the gas allocation.

"It's been decided. Next week it will be announced by the Energy and Mineral Resources Ministry," he said at his office.

State oil and gas company PT Pertamina owns 50 percent of the Senoro field, while domestic private energy company PT Medco Energi Internasional holds the remainder. Pertamina fully owns the Matindok field.

Pertamina and Medco intended to export the gas in the form of LNG. They established PT Donggi Senoro LNG to construct and operate the LNG plant.

Pertamina holds a 29 percent participating stake in the venture, while PT Medco Energi Internasional holds 20 percent and Japan's Mitsubishi Corporation holds a controlling 51 percent share.

However, the project's status become uncertain when most of the economic decision making in the 2004-2009 administration was supervised on a day-to-day basis by then vice president Jusuf Kalla.

Kalla decided the Donggi-Senoro LNG should be sold, at least primarily, to the domestic market.

This decision is thought to be the reason why Japan's Kansai Electric Power Co. Inc. terminated its agreement to buy the LNG in August last year. Now three Japanese buyers are still lining up to buy the LNG: Chubu Power Co. Inc., Kyushu Electric Power Company and Korea Gas Corporation (Kogas).

Lukman Mahfoedz, project director at Medco, said he had not known about the Vice President's recommendation, but he said the decision was very welcome.

"We hope the decision has been made," he said.

In an earlier press conference, Lukman said that after the government made its decision on the project, Medco would need about six weeks to formulate the final investment decision (FID).

"We expect to come up with the FID in July this year," he said.