Chevron, ExxonMobil sign Indonesia gas agreements

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Jan. 25 -- ExxonMobil Corp. and Chevron Corp. signed agreements, valued at $4.7 billion, to supply natural gas to several Indonesian firms.

Under its agreements, valued at $1.4 billion and $1.7 billion respectively, ExxonMobil will supply gas from Cepu block to fertilizer and related products giant PT Petrokimia Gresik and to the state electic power company PT PLN.

For its part, Chevron will supply gas valued at $1.6 billion from its East Kalimantan fields to fertilizer producer PT Pupuk Kaltim.

Earlier this week, Chevron said it was reviewing its business plans in Indonesia, but remains committed to developing natural gas fields offshore from East Kalimantan.

"We are currently reviewing our business plans as part of our normal business planning process and in light of changes in the business environment," said Chevron spokesman Gareth Johnstone.

"That said, we are committed to developing the deepwater projects in the Kutei basin. We look forward to working in partnership with the government of Indonesia and BPMigas in developing these fields," Johnstone added.

Meanwhile, the new gas supply agreements with Chevron and ExxonMobil reflect a change in policy for the Indonesian government, which is requiring stronger commitments from international oil companies in the country to make part of their production available to the domestic market.

Finance Minister Sri Mulyani Indrawati underlined that change of policy at a conference earlier in the week, revealing government plans to prioritize gas production for domestic consumption instead of exports in the coming years.

Mulyani said the change comes as domestic consumption is expected to continue rising in line with growth in local industries and a burgeoning middle class.

Mulyani said the government had no option other than to prioritize the national interest, despite the fact that gas companies might face difficulties in meeting demand from buyers abroad.

To meet the competing demands of domestic and international markets, Mulyani urged producers to maintain or increase production of gas.

According to upstream oil and gas regulator BPMigas, national demand for gas is projected to rise at a rate of 2.8%/year, reaching 6 bcfd by 2020 from 4.2 bcfd in 2007.

Due to the increased demand, BPMigas said the government has increased the proportion of gas for domestic industries to 49.5% in 2008 from 29.6% in 2002.

To help increase Indonesia's gas production, BPMigas chairman Raden Priyono said the government would rely on a number of big LNG projects including the Tangguh LNG plant in Papua, the Senoro LNG plant in Central Sulawesi, and the development of the Masela gas block in the Timor Sea.