Indonesia to extend Medco's Aceh gas block contract

JAKARTA Wed May 20, 2009 6:14am EDT

JAKARTA May 20 (Reuters) - Indonesia's government will extend the natural gas block contract of Block A in Aceh province operated by Indonesia's energy explorer PT Medco Energi Internasional Tbk (MEDC.JK), a senior mines and energy official said on Wednesday.

The block, whose contract will expire in 2011, has an estimated gas reserve of around 500 billion cubic feet and can produce about 50 to 100 million cubic feet per day for about 15 years.

Medco is the operator of the block with a 41.67 percent stake. The other partners are Britain's Premier Oil Plc (PMO.L) with 41.66 percent and Japan Petroleum Exploration Co. (1662.T) (JAPEX) with 16.67 percent.

"The block A area is government priority to be extended. The minister will issue a decision about the extension of the contract by the end of this month," Evita Legowo, director general of oil and gas at the ministry, told reporters.

Legowo said the government wanted the operator to develop the block as quickly as possible as the country needed the gas.

"We have already resolved the terms and conditions for the block, including the split of production which will be at 65 percent for the the government and 35 percent for the contractor," she said.

A Medco official, who declined to be identified, said the development of the block will need around $600 million.

"Medco wants the government to extend the contract of the block for another 20 years," the official, who declined to be identified, said.

Indonesia has pushed the contractors to move faster in developing the area as the country badly needs the gas for domestic fertiliser factories.

In April last year, Medco signed a natural gas supply agreement with Indonesian state electricity firm PT Perusahaan Listrik Negara (PLN).

Medco (MEDC.JK) will supply 85 trillion British Thermal Units (BTU) of gas from Block A area to PLN for 17 years starting 2010.

Indonesia has far more gas than oil but it faces limited supplies due to long-term LNG export commitments, which it is reviewing. The country has about 180 trillion cubic feet of natural gas reserves. (Reporting by Muklis Ali; Editing by Ben Tan)