The effective date of the transaction remains January 1, 2003 and the sale consideration is US$236 million in cash. INGRMI and CNOOC will pay the entire amount on completion of the deal. The asset has not yet commenced production, and has therefore not contributed to BG Group's profits.
Completion of the transaction is conditional on Indonesian government and partner approvals and is expected to be completed within the second quarter of 2004.
BG Group has a 50% operated interest in the Muturi PSC in West Papua. The Company's interest in the Muturi PSC provides it with a 10.73% interest in the Tangguh LNG project, based on independently certified proved reserves.
In July 1997, BG and 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 gas at a tubing-limited rate of 36 mmscfd. 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 the Muturi PSC. Following independent reserves assessment carried out by consultants DeGolyer and MacNaughton in August 1998, proved and probable gas reserves in the Wiriagar, Berau and Muturi PSCs were certified at 18.3 tcf.
In September 2002, the Tangguh partners announced the sale of 2.6 mtpa of LNG under a 25-year contract to the proposed Fujian importation terminal in China. On December 19, 2002, BG Group and its partners in the Tangguh LNG project signed the Tangguh Joint Venture Agreement (TJVA). The TJVA is subject to Government of Indonesia endorsement, but provides for the unitisation of the Muturi, Berau and Wiriagar PSCs and defines how the partners will work together further to develop and manage Tangguh. Under the TJVA and as previously mentioned, BG Group 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 August 2003, Tangguh signed Heads of Agreements with SK and POSCO for the sale of up to 1.35mtpa of LNG into Korea. The marketing of the remainder of Tangguh's capacity continues and first production is scheduled to begin in 2007.
Other than BG Group, the current participants in the PSC are CNOOC Muturi Limited with 44%, BP Muturi Holdings B.V. with 1%, and Indonesia Natural Gas Resources Muturi Inc, LNG Japan Corporation with 5%. LNG Japan Corporation is a joint venture between Nissho Iwai Corporation and Sumitomo Corporation.
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