Indonesia's state-owned oil and gas company Pertamina expects the long-awaited and technically challenging East Natuna gas block project to be on stream by 2022, with the company planning to sign a production sharing contract with the government on October 28, a senior official said Monday.
"We target to sign the PSC on October 28 this year. We estimate to start developing the project in 2012, so it could be on stream in 2022," Pertamina's upstream director Muhammad Husen said.
Pertamina had originally expected to start developing the Natuna gas block in early 2010, but in 2009 said it expects the gas from Natuna to be brought into production by 2017-2018, Platts reported earlier.
"Pertamina has asked for certain privileges from the government -- it could be in the form of tax [concessions] or production sharing. Discussion over the terms and conditions are still going on with the government, while we are also negotiating with our partners to decide how much stake each party should have in the project," Husen said.
Pertamina has chosen three potential partners for the East Natuna block development -- formerly called Natuna D-Alpha -- ExxonMobil, Total and Malaysia's Petronas.
"There are various issues to consider, like how much gas will be developed ... whether we will develop all of the reserves or just a half, and whether it will be sold in the form of LNG or natural gas," Husen said.
The East Natuna block was initially awarded to ExxonMobil in 1995, but the Indonesian government terminated the company's contract in 2006, after it failed to provide a development plan by the 2005 deadline. Pertamina became sole owner of the block in 2008.
The Natuna gas block contains an estimated 222 Tcf of gas, but with a high carbon dioxide content of around 70%. About 46 Tcf of gas is thought to be recoverable, although the separation of carbon dioxide is technically challenging and costly.
Industry estimates have pegged the block's development costs in the range of $30 billion to $40 billion, and Pertamina said in 2009 it needed an oil price of at least $85/barrel to make the project economically viable. Pertamina had also estimated that it would require of $13 billion-15 billion to produce 1 billion cubic feet/day of gas from Natuna.
