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Indonesia's Pertamina inks 30-yr gas supply deal with PLN

JAKARTA (Reuters) — Indonesian state-owned energy company Pertamina signed a preliminary agreement on Tuesday to supply state electricity utility Perusahaan Listrik Negara (PLN) with natural gas for the next 30 yr.

"This is just the beginning," Deputy Energy and Mineral Resources Minister Arcandra Tahar told reporters, indicating that the deal would be formalised at a later date.

Under the heads of agreement, Pertamina agreed to sell 100 MMcfd of natural gas to PLN at a price of $7.60/MM British thermal units. Pertamina also plans to sell 72 MMcfd of gas from the field to local industry, Tahar said.

Of that amount, $6.70 is for the gas itself and 90 cents is a toll fee for a gas pipeline.

The gas will be supplied from the Jambaran-Tiung Biru field in East Java, which has not started producing yet.

Output from the Jambaran wellhead is expected to reach 330 MMcfd, but up to 35% of that is expected to be carbon dioxide, said Pertamina EP Cepu President Director Adriansyah, who goes by one name only.

"There's a lot of impurities," he said, referring to sulfur and carbon dioxide content.

Production from the field is expected begin in late 2020 or 2021, and plateau for 16 yr, after which it would begin to decline, said Adriansyah, adding that Pertamina targets signing a gas sales purchase agreement for Jambaran this year.

Pertamina hopes to supply gas from the Jambaran field to industry in Semarang, in Central Java province, via the Gresik-Semarang pipeline that is expected to be completed next year.

Indonesia's average daily natural gas output slipped to 1,131,000 boepd, equal to about 5,932 MMcfd, in the first half of 2017, down from 1,189,000 boepd in 2016, government data presented on Tuesday showed.

Reporting by Wilda Asmarini in Jakarta; Writing by Fergus Jensen in Singapore; Editing by Tom Hogue and Christian Schmollinger

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Editorial Comment
-Adrienne Blume
At CERAWeek by IHS Markit, held in Houston in March, IEA Director Fatih Birol said that the world would soon see a major second wave of shale gas production from the US in response to higher energy prices and growing demand from India and China.
Regional Focus
-Shem Oirere
Mozambique and Tanzania hold an estimated 180 Tft3 and 57 Tft3 of proven natural gas reserves, respectively.

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