the jousting continues "bpmigas slams ewc"

BPMigas slams Energy Sengkang over LNG deal
Alfian , The Jakarta Post | Fri, 03/26/2010 10:52 AM | Business

Upstream oil and gas regulator BPMigas says it could have executives at Energy Equity Epic Sengkang, the operator of the Sengkang gas block, fired for signing an LNG sales agreement with the Tokyo Gas Co.

BPMigas? head of public relations Sulistya Hastuti Wahyu said the deal was irregular.

?How come they sign such an agreement, when they have not even submitted their proposal to us for the LNG project,? Sulistya said.

He added that BPMigas would reprimand the company and might even impose sanctions on the executives. ?Sanctions could include executive dismissal,? he said.

Energy Sengkang, 100 percent owned by Australia-based Energy World Corporation (EWC), holds the production sharing contract (PSC) for the Sengkang Block located in South Sulawesi province.

EWC said the block potentially has reserves of between 2 trillion and 4 trillion cubic feet (TCF) of
recoverable gas.

Currently the gas from the block is used to fuel a 195 megawatt gas-fired combined-cycle power plant operated by PT Energi Sengkang, another subsidiary of EWC.

Since September last year, EWC has been considering that it may build an LNG plant near the block.

The plant would be built with a production capacity of 2 million metric tons per annum (MTPA) and this could later be ramped up to 5 MTPA, Stewart Elliot, CEO of EWC said on Sept. 7 last year.

Bloomberg reported on Wednesday that Tokyo Gas, Japan?s largest natural gas distributor, planned to buy 500,000 tons of LNG a year from the project starting in or after 2012.

As part of the deal, Tokyo Gas also plans to buy a 25 percent stake in the Sengkang gas project.
In September last year, Energy Sengkang signed a similar agreement with state gas distributor
PT Perusahaan Gas Negara (PGN).

Sulistya said BPMigas also reprimanded PGN for this agreement. ?They have apologized for this,?
he said.

EWC?s executive director Brian Allen told The Jakarta Post that the LNG project had secured an approval from the Investment Coordinating Board (BKPM) in 2008. ?The LNG project uses the downstream-model as its basis. There is no specific regulation requiring BPMigas approval under this,? Allen said.

Under the downstream model, the LNG plant is seen as a separated from the upstream development.

Stewart Elliot, CEO of EWC, said a copy of the project approval had been sent to several of the highest institutions in the country, including the President of the Republic of Indonesia.

He added that, earlier in 2006, the project had also secured a license in principle from the Energy and Mineral Resources Ministry.

?Actually, we are not against BPMigas, but, with all the licenses we have, it?s difficult for us to understand why BPMigas keep saying that it does not know about the project,? he said.