Upstream oil and gas regulator BPMigas has reached a deal with Malaysia’s Petronas to set a new price on a natural gas contract, putting an end to negotiations that started last month.
“We are waiting for final approval from the energy minister,” BPMigas chairman Raden Priyono said on Wednesday.
The parties agreed to set the rate at “close to $6 per million British thermal units [mmbtu],” he added, which was close to the price the Indonesian government had proposed.
BPMigas had been deadlocked in negotiations over a new price for natural gas from a lucrative block in the Natuna Sea operated by US oil and gas giant ConocoPhillips. It said foreign buyers were stuck on $5.5 per mmbtu at that time, though the government wanted a higher rate.
“It is close enough to the price that we wanted,” Priyono said, although he declined to disclose the final price.
Industry analysts said that as long as the government came up with a decent proposal for foreign gas buyers, they could renegotiate the terms of sale.
Pri Agung Rakhmanto, an energy analyst from the Reforminer Institute, said the positive result of the renegotiation with Petronas showed that Indonesia had a good bargaining position with overseas buyers.
“If there is political will to renegotiate the contracts, I think the buyers will understand,” he said.
The government, he added, should also review other sales contracts, although he declined to name which ones.
Officials at Petronas Carigali, a subsidiary of Malaysia’s state-owned energy firm, declined to comment on the issue.
Petronas Carigali signed a contract in 2002 to source gas from the Natuna block. The Indonesian government, however, is looking to raise the price of the gas from Natuna’s Block B as part of efforts to make contracts more profitable as global energy prices increase.
Discussions to change the purchasing price on the natural gas contract had been scheduled in 2009 but only started last month.
As much as 300 million cubic feet of gas from the field is sold to Malaysia every day and is delivered to Petronas’s Duyong offshore gas facility in the state of Terengganu at $2.80 per mmbtu.
ConocoPhillips holds a 40 percent stake in Block B, while Japan’s Inpex has a 35 percent stake. The remaining shares are owned by Chevron.
Jusuf Kalla, who was vice president from 2004 to 2009, has voiced his concerns over unfair contracts. He has called for the renegotiation of a 2002 contract with China, which was signed during President Megawati Sukarnoputri’s tenure.
Under that contract, Indonesia agreed to sell gas to China at $2.40 per mmbtu for 25 years.
