Indonesia, Premier negotiate gas price deal

Indonesia has offered a larger production split to production-sharing contractor Premier Oil PLC as compensation for a proposed cut in price of the firm's natural gas from Natuna field.

Eric Watkins
Senior Correspondent

LOS ANGELES, Mar. 2 -- Indonesia has offered a larger production split to production-sharing contractor Premier Oil PLC as compensation for a proposed cut in price of the firm's natural gas from Natuna field.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said the government will increase the split for Premier to 49% from 30% if the firm agrees to reduce the price of gas from Natuna to less than $6/Mcf for domestic consumers.

Premier normally sets the price of its Natuna gas at $6/Mcf. State-owned electric power provider PLN is negotiating with Premier on a long-term contract for the supply of 30 MMcfd of gas to the Panaran gas-fired power plants in Batam. Purnomo, however, said PLN could not afford to pay the market rate.

Singapore currently pays the market rate for Premier's Natuna gas, but Indonesia said it will not consider exports of gas to neighboring Malaysia and Singapore beyond current contracts, citing instead the need to meet rising domestic demand, although existing contracts will be honored (OGJ Online, Mar. 1, 2007).

Contact Eric Watkins at hippalus@yahoo.com.

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