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Indonesia rejects development plan for LNG project

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 2 -- Indonesia’s upstream oil and gas regulator BPMigas rejected a plan of development for an LNG project proposed by Energy Equity Epic Sengkang (EEES), a wholly owned subsidiary of Energy World Corp. (EWC).

“The plan of development is not backed up with valid data,” said BPMigas Chairman R. Priyono, adding, “How can we approve the plan of development if we don’t even know the reserve data?”

Priyono said BPMigas rejected EEES’s work program and budget for development of new gas reserves because they don’t follow the standard operating procedures. “It’s strange they want to drill without an initial seismic survey,” Priyono said.

EWC’s general counsel Thompson Situmorang said a 3D seismic survey would be expensive for a marginal field like Sengkang. “We propose a mini-seismic method, which will be more economical and cause no harm for the environment, but BPMigas has not agreed yet,” he said.

Thompson claimed the development plan is “still under discussion” with government officials.

EEES holds the production-sharing contract for the Sengkang Block, which is estimated to hold reserves of 2-4 tcf of recoverable gas. Currently, the gas is being used to fuel the 195-Mw gas-fired combined-cycle Sengkang Power Plant operated by EWC subsidiary PT Energi Sengkang.

EWC is considering construction of an LNG plant near the Sengkang block, built with an initial production capacity of 2 million tonnes/year and later rising to 5 million tpy, according to EWC Chief Executive Stewart Elliot.

Elliot said the company had additional reserves that could be processed by the proposed LNG plant, a point reiterated by EWC Executive Director Brian Allen.

During a hearing with the House of Representatives Commission VII overseeing energy and mineral resources, Allen said the new reserves would be able to provide 300-500 bcf of gas for the proposed LNG plant

Allen said the proposed LNG development would cost EWC $500 million and “a small percentage” of the LNG would be exported to finance the construction and operation of the facility.

According to analyst BMI, rejection of the EEES proposal will set back plans for the liquefaction plant and is likely to delay the launch of LNG supplies to state-owned gas distributor PT Perusahaan Gas Negara (PGN).

BMI said PGN, following an agreement signed last September, had hoped to purchase 1.5-5 million tpy of LNG from Sengkang to feed its planned regasification terminals in North Sumatra and Java.

EWC owns 100% of the Sengkang production-sharing contract. The project has a take-or-pay power sales contract until 2022 to supply power to state-owned power utility PT Perusahaan Listrik Negara. EWC also owns 95% of the Sengkang power plant, while Medco Sengkang holds a 5% interest.

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