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State oil
and gas company Pertamina and its partners expect to spend up to $40 billion to
develop a gas block in western Indonesia, a company official said on Monday.
Muhammad
Husen, director of upstream business at Pertamina, said the huge cost would
include investment for exploration, exploitation and gas transportation system.
“The $40
billion cost is the original budget. It can be increased or reduced,” Husen
told reporters on Monday.
The East
Natuna block in Riau Islands contains about 200 trillion cubic feet of gas and
would be the largest gas reserve in Indonesia, according to US oil giant Exxon
Mobil. But only 45 trillion cubic feet can be taken because extracting the
remainder, with its high carbon content, would be too costly.
Pertamina
will cooperate with three other oil and gas companies: Malaysia’s Petronas
Carigali, France Total E&P Indonesie and US ExxonMobil Indonesia.
Divvying up
the composition of the stakes in the gas block has not been decided. Husen said
last month that the ownership stake is expected to be determined in October and
the production-sharing contract will be signed on Oct. 28.
A PSC
typically stipulates the sharing of revenue between the companies and the
government. It also sets tax incentives, tax obligation and cost recovery.
It was not
clear whether this East Natuna gas block would be the biggest investment in
Indonesia’s oil and gas history.
The East
Natuna gas block will require advanced technology to extract natural gas. Last
month, Husen said Pertamina and its partners were confident that they have
enough expertise and technology to harvest gas from the block.
Total
investment to develop the Masela block in Timor Sea and to build the LNG
floating terminal is estimated at $19.7 billion upon completion in 2016.
The cost to
develop the East Natuna project may be less than the estimated budget, at about
$20 billion, Husen said.
“The $20 billion
cost is our calculation for using the gas pipeline to deliver the gas,” Husen
said. The cost will rise should the delivery system to channel the gas be
processed by the LNG plant, he said, though that may depend on the government’s
objective.
The consortium,
Husen added, has several possible plans for Natuna, including delivering gas
through a pipeline to Sumatra and Java. Some of the gas will be sold to
Malaysia, he said.
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