Conrad Asia Energy Ltd. and Indonesia’s national oil and gas company PT Pertamina have entered into binding key terms for a gas sales agreement (GSA) for the domestic portion of output from the pending Mako field project.
“These Key Terms are an important step towards the Mako development final investment decision planned by midyear 2024”, Conrad said in a news release.
Conrad and Pertamina, through its gas subsidiary PT Perusahaan Gas Negara Tbk (PGN), agreed to sign the GSA by May. The GSA will commit more than a fourth of sales gas volumes from Mako to the Indonesian market, while Conrad expects to export the rest to Singapore.
“Under these binding Key Terms, Conrad and PGN will agree in good faith and sign a fully termed Gas Sales Agreement for the domestic portion of the gas produced from the Mako field located in the Duyung Production Sharing Contract (‘PSC’) in the West Natuna Sea, offshore Indonesia”, the announcement stated.
Mako is estimated to contain contingent resources of 413 billion cubic feet (Bcf) gross in the best-estimate scenario (2C resources), as assessed by Gaffney, Cline & Associates, according to Conrad. More than half of the figure, at 215 Bcf, is net to Conrad, which holds a 76.5 percent stake in the offshore Duyung block.
“This GSA will be subject to the construction of the pipeline connecting the West Natuna Transportation System with the domestic gas market in Batam”, Conrad said. “It forms part of Conrad’s Domestic Market Obligation as set out in the Mako’s revised Plan of Development.
“The sales volumes under this GSA will represent approximately 29.5 percent of Mako sales gas volumes until the PSC expires in January 2037”.
Through a regulation passed two decades ago, Indonesia requires oil and gas contractors to allot up to 25 percent of their share of production for domestic supply. “The Contractor’s share in meeting domestic needs… shall be determined on the basis of a system of prorated production of Crude Oil and/or Natural Gas”, states Republic of Indonesia Government Regulation Number 35 of 2004.
Conrad managing director and chief executive Miltos Xynogalas said in a statement about the GSA with PGN, “This agreement, combined with Conrad’s recent signing of a Memorandum of Understanding for its Aceh gas resources also with PGN, will further advance the Government of Indonesia’s ambition to meet the fast-growing energy needs of the country”.
Under the memorandum of understanding (MOU), Conrad agreed to cooperate in the provision of gas or liquefied natural gas from its two Aceh PSCs, as well as in the development of gas infrastructure. The two blocks contain 2C resources of 214 Bcf, 161 of which is net to Conrad, according to the company.
“Under the MOU, the parties will undertake a joint study to examine commercialization options of the gas resources in the two PSCs”, Conrad said in a press release March 1. “The existing shallow-water discoveries will be the area of initial focus. The parties will seek to cooperate in the development and maintenance of possible small-scale LNG infrastructure and sales of the LNG”.
Conrad earlier signed a non-binding term sheet with fellow Singapore-based company Sembcorp Gas Ltd. for the export of Mako gas to the city-state.
“The key conditions of the Term Sheet relate to the sale of Mako gas from start of production to the end of the Duyung PSC in 2037, for a total sales gas volume of c 293 Bcf, with potential increase to c 392 Bcf, representing from 71 percent to 95 percent of the field’s estimated 2C Contingent Resources of 413 Bcf (100 percent) as assessed by Gaffney, Cline & Associates (26 August 2022)”, Conrad said in a results release for the third quarter of 2023, published October 27. “Gas sales will be priced against Brent oil”.
Conrad said at the time the preliminary agreement with Sembcorp had been endorsed by Indonesia’s upstream regulator.
To contact the author, email jov.onsat@rigzone.com
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