Natuna D-Alpha: Another headache for ExxonMobil
ExxonMobil Oil Indonesia Inc, a subsidiary of US giant ExxonMobil Corporation, is facing another headache over its Natuna D-Alpha working contract as BP Migas (the upstream oil and gas regulatory body) urge the company to immediately submit the feasibility study for the development of Natuna's 173 trillion standard cubic feet (TCF) of natural gas.
ExxonMobil is awaiting the settlement of its years of dispute with Indonesia's PT Pertamina over the giant Cepu oil and gas field in Java Island. Politians mounts pressures on government to appoint Pertamina as the operator of Cepu project.
On September 2005, BP Migas threatened to cancel Exxon's working rights for Natuna D-Alpha amid uncertainty over its future development.
Natuna gas field was estimated to hold total reserves of 140 trillion cubic feet (tcf), though some 72 percent of the reserves contain carbon dioxide. Without the CO2 the gas reserves should be around 45 TCF, which is still huge.
Under such circumstances, the development of Natuna D-Alpha needs investment up to US$40 billion. Such a huge development cost calls for a market capable of generating an adequate return.
That's why, Indonesian government had given the owners of the block the right to retain 40 percent of the block's future gas output, while under standard production sharing contracts, contractors keep 30 percent of gas output, with the remaining 70 percent going to the government.
The D-Alpha block is 74 percent owned by ExxonMobil Oil Indonesia. Pertamina holds the remaining 26 percent of the block. D-Alpha was part of the Natuna gas fields discovered in 1973, located in Natuna Sea, about 225 km off east Natuna Island (600 km northeast of Singapore, and 1,100 km north of Jakarta).
ExxonMobil signed an agreement with the government in 1995 for a 10 year of commercial operation. The fields have never been in production following the failure in the drilling in a number of locations since 1995, but both Exxon and Pertamina still conduct marketing activities and study. Exxon got contract extension for two years that would mature early 2007.
Pertamina has been frustrated by the marketing problem for Natuna D-Alpha and planned to divest 13 percent of its shares to Malaysia's Petronas in exchange of Petronas being the off-taker. In fact, Petronas, Pertamina, and ExxonMobil signed a memorandum of understanding on March 18, 2002 to jointly develop the block.
Three years ago, hopes also emerged as a couple of businessmen brought together by the Asia Pacific Economic Cooperation (APEC) planned to build a pipeline project touted to be the longest undersea gas pipeline in the world linking Natuna D-Alpha, Natuna Island and Shanghai, China. The 4,875-km long pipeline would be routed via Vietnam, Malaysia, and Thailand. However the US$8 billion pipeline project is yet to receive official endorsement from China and Indonesia.
In June 2005, Executive VP Corporate Strategy and Development PTT Public Company Limited (Thailand) Tevin Vongvanich met energy minister Purnomo Yusgiantoro to express the company's interest in developing Natuna D-Alpha.
Purnomo said that time that since there is already a gas pipeline from Natuna (West Natuna fields operated by Conoco), it would make sense if PTT also join the Natuna D-Alpha. But no information since then.
Exxon's partner, Pertamina, decided to postpone the D-Alpha project last year due to huge investment cost. It's a hell of a strain for Exxon.
On September 2005, BP Migas threatened to cancel Exxon's working rights for Natuna D-Alpha amid uncertainty over its future development.
Natuna gas field was estimated to hold total reserves of 140 trillion cubic feet (tcf), though some 72 percent of the reserves contain carbon dioxide. Without the CO2 the gas reserves should be around 45 TCF, which is still huge.
Under such circumstances, the development of Natuna D-Alpha needs investment up to US$40 billion. Such a huge development cost calls for a market capable of generating an adequate return.
That's why, Indonesian government had given the owners of the block the right to retain 40 percent of the block's future gas output, while under standard production sharing contracts, contractors keep 30 percent of gas output, with the remaining 70 percent going to the government.
The D-Alpha block is 74 percent owned by ExxonMobil Oil Indonesia. Pertamina holds the remaining 26 percent of the block. D-Alpha was part of the Natuna gas fields discovered in 1973, located in Natuna Sea, about 225 km off east Natuna Island (600 km northeast of Singapore, and 1,100 km north of Jakarta).
ExxonMobil signed an agreement with the government in 1995 for a 10 year of commercial operation. The fields have never been in production following the failure in the drilling in a number of locations since 1995, but both Exxon and Pertamina still conduct marketing activities and study. Exxon got contract extension for two years that would mature early 2007.
Pertamina has been frustrated by the marketing problem for Natuna D-Alpha and planned to divest 13 percent of its shares to Malaysia's Petronas in exchange of Petronas being the off-taker. In fact, Petronas, Pertamina, and ExxonMobil signed a memorandum of understanding on March 18, 2002 to jointly develop the block.
Three years ago, hopes also emerged as a couple of businessmen brought together by the Asia Pacific Economic Cooperation (APEC) planned to build a pipeline project touted to be the longest undersea gas pipeline in the world linking Natuna D-Alpha, Natuna Island and Shanghai, China. The 4,875-km long pipeline would be routed via Vietnam, Malaysia, and Thailand. However the US$8 billion pipeline project is yet to receive official endorsement from China and Indonesia.
In June 2005, Executive VP Corporate Strategy and Development PTT Public Company Limited (Thailand) Tevin Vongvanich met energy minister Purnomo Yusgiantoro to express the company's interest in developing Natuna D-Alpha.
Purnomo said that time that since there is already a gas pipeline from Natuna (West Natuna fields operated by Conoco), it would make sense if PTT also join the Natuna D-Alpha. But no information since then.
Exxon's partner, Pertamina, decided to postpone the D-Alpha project last year due to huge investment cost. It's a hell of a strain for Exxon.
Labels: BP Migas, Conoco, ExxonMobil, Natuna D-Alpha, Pertamina, Purnomo Yusgiantoro
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posted by yosef at 12:05 AM
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