By OGJ editors
HOUSTON, Dec. 5 -- Mitsui Indonesia Gas BV, a wholly owned unit of Mitsui & Co. Ltd., has signed a sale and purchase agreement with BG Group to acquire BG's 50% interest in the Muturi production-sharing contract (PSC) in West Papua, Indonesia, for $236 million.
BG's interest in the Muturi PSC provides it with a 10.73% interest in the Tangguh LNG project, based on independently certified proved reserves. The deal becomes effective Jan. 1. BG pegs the "book value" of its investment in the Muturi PSC, which has not yet started production, at $103 million, it said.
"Tangguh is a good project for the remaining owners, but our scope for influencing the technical and commercial development—core strengths of BG—has always been limited, commented Dave Roberts, BG executive vice-president and managing director, Eastern Hemisphere.
Completion of the transaction is conditional on Indonesian governmental approvals and the waiver of preemption rights by the other Muturi PSC partners.
Other PSC partners are CNOOC Muturi Ltd. 44%, BP Muturi Holdings BV 1%, and Indonesia Natural Gas Resources Muturi Inc. (LNG Japan) 5%.
Project history
Muturi PSC lies in West Papua, about 3,000 km east of Jakarta and covers an area of 1,346 sq km.
The onshore northern part of Muturi PSC contains the Mogoi deep gas discovery, which was drilled by BG in 1996 and tested at a cumulative 40 MMscfd of gas. The giant Vorwata gas field, discovered in 1997, straddles the boundary of the offshore southern part of Muturi PSC and the adjacent BP-operated Berau PSC.
In July 1997, BG and then-ARCO (now BP) agreed to collaborate on the supply of gas to the proposed Tangguh LNG project. In October 1997, the Vorwata-4 well flowed at 36 MMscfd of gas. This was followed by four further gas discoveries, drilled by BG and announced in May 1998, which proved the extension of the Vorwata field into Muturi PSC.
Following independent reserves assessment in August 1998, proved and probable gas reserves in the Wiriagar, Berau, and Muturi PSCs were certified at 18.3 tcf—which were deemed sufficient to support three trains each of 3-3.5 million tonnes/year of LNG for 25 years. Target markets for the Tangguh project include the Asia Pacific area (Japan, South Korea, and Taiwan) as well as China and the Philippines.
In September 2002, the Tangguh partners reported the sale of 2.6 million tonnes/year of LNG under a 25-year contract to the proposed Fujian importation terminal in China. At yearend 2002, BG and its Tangguh LNG project partners signed the Tangguh Joint Venture Agreement (TJVA).
TJVA provides for the unitization of the Muturi, Berau, and Wiriagar PSCs and defines how the partners will work together further to develop and manage Tangguh. Under TJVA, BG has a 10.73% interest in the project, with the opportunity to increase this equity interest if reserves in the area around the Mogoi Deep discovery are independently certified by 2006.
In March, a consortium comprising KBR, JGC Corp. and PT Pertafenikki Engineering (KJP) were awarded a $1.4 billion engineering, procurement, and construction contract for the Tangguh LNG facilities.
Finally, in August, Tangguh signed heads of agreements with SK and POSCO for the sale of as much as 1.35 million tonnes/year of LNG into South Korea.
Marketing of the remainder of Tangguh's capacity continues; first production is slated for 2007.
