BP May Get Extension of Its Kangean Gas Contract

Rachmat Sudibyo chief of the Indonesian Oil and Gas Implementing Body has apparently recommended to the Ministry of Energy and Mineral Resources that BP should be granted an extension from the government for its operation of the Kangean gas block offshore East Java. The Indonesian oil industry watchdog said that the approval was granted on the basis that the Kangean Block sill had potential for further development and that BP was capable of carrying out the development. The production-sharing contract with BP Plc for the Kangean Block will expire on November 13, 2010.

"Our recent feasibility study shows that the Kangean Block has approximately one trillion cubic feet of gas reserves," Rachmat said after a hearing with the House of Representatives. Besides the reserves, other considerations that had been taken into consideration when endorsing the gas contract extension included investment, future profits and BP's technological capability.

It has been estimated that the gas production will continuously diminish to 100 mmcfd in 2005 and 20 mmcfd in 2010, from current production level at 180 MMCFD, due to diminishing gas reserves in the old fields.

With this extension, BP could explore new gas reserves in Terang Sirasun and Batur, which lie within the Kangean Block, and thereby potentially increase gas production by 60 more mmcfd in 2006 and 300 mmcfd in 2006. The production increase is needed to prevent future gas shortages in East Java, said Rachmat.