Malaysia's state-owned oil and gas company Petronas will likely pull out from its partnership with Indonesia's Pertamina to develop the East Natuna gas project, a senior Pertamina official said Monday.
"The official statement has not been made [by Petronas]. But the reason [for withdrawal] is because the project is not its priority," Pertamina's upstream director Muhammad Husen told Platts without giving details.
"We will be with only ExxonMobil and Total ... for a temporary period," he added.
Separately, Pertamina's investment planning and risk management Afdal Bahaudin said: "We are still carrying out an exercise [to choose a new partner], we have not decided yet."
Petronas could not be reached for an immediate comment.
Pertamina signed heads of agreement in 2010 with Exxonmobil, Total and Petronas for the development of the Natuna block.
Petronas was picked as Pertamina's partner for Natuna as the gas from Natuna would likely be sold to Malaysia.
Prior to signing the HoA, Pertamina had shortlisted eight oil companies -- through Wood Mackenzie -- as potential partners for Natuna. They were China's CNPC, ExxonMobil, Petronas, Shell, Statoil, Total, Chevron and Eni. But CNPC then notified Pertamina that it had decided to opt out.
Pertamina, which earlier wanted to begin the development of the project this year and bring it on stream in 2022, has yet to make any progress as negotiations with the government on the production sharing contract are yet to be completed.
The East Natuna 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 but the separation of carbon dioxide from the gas is technically challenging and costly.
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 then became sole owner of the block in 2008.
Industry estimates have pegged the block's development costs at $30 billion-40 billion, and Pertamina said in 2009 it needed the oil price to be 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 Bcf/d of gas from Natuna.
