Chevron, ConocoPhillips sign Indonesia gas supply deal

Reuters, JAKARTA, Mon May 31, 2010 6:29am EDT

May 31 (Reuters) - Chevron Corp (CVX.N), the biggest oil producer in Indonesia, has signed a final supply deal to buy natural gas from ConocoPhillips (COP.N) on Sumatra island, the head of Indonesia's energy watchdog, BPMIGAS, said on Monday.

ConocoPhillips has agreed to two separate deals, amending terms to an existing deal after some politicians complained that the deal was unfair because of the rise in oil prices.

It will supply a total of 77.9 trillion British thermal units of gas during a four-year period, and an additional 1,177 trillion British thermal units over a 12-year period, Priyono, BPMIGAS chief, told reporters.

ConocoPhillips will supply the gas from its fields in South Sumatra.

The gas deal will replace a previous agreement under which Chevron swapped about 50,000 barrels per day (bpd) of crude oil from Duri for about 400 million cubic feet per day of natural gas from ConocoPhillips' gas field in South Sumatra.

"This final deal will guarantee long-term gas supply to support Chevron's operations in Sumatra," Priyono said.

Chevron needs the gas to support technology used to coax more oil from its Duri field in Central Sumatra. The technology, known as steamflood, can enhance recovery on oil fields where output is declining.

Priyono said that Chevron currently produces about 370,000 barrels per day of crude oil, including Minas and Duri, from its operation in Central Sumatra.

Indonesia has turned into a net importer of crude in recent years, as production has slumped after a failure to tap new fields fast enough.

Southeast Asia's biggest economy produced about 1.5 million bpd about a decade ago, but production has now slumped to below 1 million bpd.

(Reporting by Muklis Ali; Editing by Sara Webb)