ASEAN Energy News Service

Three fuel distributors, PT Aneka Kimia Raya Corporindo (AKR), PT Shell Indonesia, and PT Petronas Niaga Indonesia, may operate alongside state oil and gas company PT Pertamina in distributing subsidized fuels, starting next year.

Downstream oil and gas regulator BPHMigas chairman Tubagus Haryono said that three companies had met the criteria to distribute subsidized fuels, but their appointment is subject to the endorsement of the 2010 state budget bill currently being deliberated in the House of Representatives.

“We need to wait for the state budget law as it will determine the subsidized fuels quota and the margin for distributing the subsidized fuels,” Tubagus said.

He added that BPHMigas would also carry out verification and clarification of the proposals on this from the three companies.

“We will verify and clarify their proposals right after the law on the 2010 state budget is endorsed.”

Tubagus added that the aspects to be verified included the three companies’ readiness to establish sufficient distribution channels in their appointed areas.

“They told us that they would complete this within two months. We require them to finish this by November,” Tubagus said.

Shell Indonesia’s spokeswoman Fathia Syarief said that the company had not received any notification from BPHMigas yet.

“We are basically ready to distribute the subsidized fuels,” Fathia said.

Shell and Petronas already produce and sell non-subsidized fuels in the country.

On Tuesday, BPHMigas announced that Pertamina is once again appointed as the subsidized fuel distributor for 2010.

Pertamina has so far been the sole distributor of subsidized fuels until the government this year decided to also give the chance to other companies to distribute subsidized fuels as of 2010.

Despite the new comers, Tubagus said Pertamina would remain dominant in term of distributed volume and coverage area.

“The subsidized fuels business will be an oligopoly market with Pertamina as the market leader.”

The government subsidizes Premium gasoline, diesel and kerosene.

Under the 2010 bill, the government estimates that subsidized fuel consumption next year will reach 21,454,104 kiloliters for Premium gasoline; 11,250,675 kiloliters for diesel and 3,800,000 kiloliters for kerosene.

Source: The Jakarta Post, 17 Sep 2009

The government has issued a new regulation on gas exports that may provide leeway for gas producers to avoid its legal obligation to earmark 25 percent of gas to domestic consumers.

The regulation, PP No. 55/2009, article 49 point 5, stipulates that if producers fail to reach a deal with domestic buyers, they can sell gas on the international market, pending approval from the energy and mineral resources minister.

Evita H. Legowo, director general for oil and gas, said the regulation was part of an overall adjustment to the existing oil and gas law, which was recently revised by the Constitutional Court.

“There is nothing new in the regulation except for the erasure of the word ‘at least’ prior to the 25 percent domestic market obligation,”

Evita said. She however misquoted Article 46, point 3 of the regulation, which in fact says “up to”.

Her statement was inconsistent with the new regulation, which will see the scrapping of at least
two points in Article 46 and adds two new points to Article 48, including the above provision on gas exports.

The government regulation was enacted on Sept. 1 after heated debate on the sale of gas from gas fields located in Donggi, Central Sulawesi, which involved a tug of war between top government executives, including vice president Jusuf Kalla.

Kalla said all gas from the Senoro and Matindok fields in Donggi was to be allocated for domestic consumption so as to supporting domestic petrochemical companies.

The Matindok field is fully owned by state oil company Pertamina, while the Senoro field is equally owned by Pertamina and Medco, who formed a joint venture with Japan’s Mitsubishi Corporation to build and operate an LNG plant, to process the gas from the two fields.

Pertamina holds a 29 percent participating stake in the venture, Medco holds 20 percent and Mitsubishi holds a controlling 51 percent share. The output of LNG from the plant was initially entirely allocated for exports.

The progress of the joint venture company has been disrupted after the vice president’s statement.

When asked whether the new regulation would mean that the joint venture could now continue with their initial plan, Evita could not confirm.

“It’s not necessarily like that. We are still discussing the matter now,” she said.

As reported earlier, the government, via the ministry’s office, has demanded Pertamina and Medco find domestic buyers for gas from the Senoro and Matindok fields.

Project director at Medco, Lukman Mahfoedz, told The Jakarta Post that the two companies had met with potential buyers but yet to secure any deals.

“There has been no progress yet. We are still waiting for the government’s final decision on a comparison between existing gas contract signed with PT Donggi Senoro LNG and the proposal from the domestic buyers,” Lukman said.

Source: Bangkok Post, 12 Aug 2009

Plc, one of the region’s biggest coal miners, posted a strong increase of 73% in net profit for Banpu the second quarter on higher coal sales volume and value, according to chief executive Chanin Vongkusolkit.

The SET-listed company’s second-quarter profit totalled 3.98 billion baht, up 73% year-on-year, on sales of 12.93 billion, a 17% increase from a year earlier. First-half profit doubled 8.78 billion baht from 4.37 billion.

The company said higher sales volume and a higher grade of coal resulted in better selling prices from its Indonesian mines, while it also saw gains from its holding in a Chinese coal mining business.

Hebi Mine, a joint venture with Asian American Coal Inc, generated equity income to Banpu of 1.76 billion baht, a 55% increase from the first quarter, as a result of higher output and strong coal prices in China.

Banpu’s average coal sales price in the second quarter was US$73.89 per tonne, a 12% decrease from $84.23 a quarter earlier as its contracts for the quarter were priced during the second half of 2008 when market prices were down.

Despite the softening average price, its coal sales volume in the quarter was up 1% to 4.51 million tonnes from the first quarter, on higher production and better management of coal shipments from Indonesia.

Mr Chanin said the company expected to increase its coal output in the latter half of the year in line with the expansion of its Indominco production area in Indonesia.

Meanwhile, its power subsidiary BLCP contributed profit of 1.25 billion baht, up 122% from the first quarter, helped by 286 million baht in foreign-exchange gains.

The China-based power business, Banpu Power Investment (China) Ltd (BPIC), which operates combined heat and power plants, reported a net profit of 101 million, down 55% from the first quarter this year as a result of lower steam demand in line with the post-winter season.

Around 92% of Banpu’s total revenue came from coal, rising 18% in revenue to 11.84 billion. Total sales of power and steam from the three combined heat and power plants in China were 1.08 billion baht, accounting for 8% of total sales revenue.

According to Siam City Research Institute, Banpu’s net profit in the latter half of the year is likely to weaken mainly due to a shutdown of production at BLCP, and softening coal prices. The brokerage forecasts full-year net profit at 10.9 billion, an increase of 19% year-on-year.

Banpu is also exploring investment opportunities in resource-rich countries such as India and Australia.

Banpu shares closed yesterday on the Stock Exchange of Thailand at 408 baht, down two baht in trade worth 1.31 billion baht.

Source: Reuters, 15 Jul 2009

CNPC, China’s top oil firm, is to invest in a $10 billion refinery project in Malaysia, though not immediately, and has agreed to take its oil products for 20 years, the Malaysian company said on Wednesday.

The 350,000 barrel-per-day refinery, to be built in Kedah in northwestern Malaysia, is still awaiting its environmental approval, expected in September.

Developed by Malaysian private firm Merapoh, construction is due to begin later in the year and completion is slated for 2013-2014. The deal would solidify CNPC’s overseas expansion in the downstream oil sector after PetroChina, CNPC’s listed arm, got approval from Beijing last month to buy a stake in Nippon Oil’s Osaka refinery and acquired a 45.5 percent stake in Singapore Petroleum Co for $1.02 billion in May.

“CNPC will take up equity in the project,” Merapoh Chairman Nazri Ramli told a press conference in the Malaysian capital, although he later added that the stake would not be taken right at the start of the venture.

Nazri said that two private equity firms, Hong Kong Beijing Star Ltd and Winson Investment Ltd, had already raised the money to buy 40 percent each of Merapoh, the refinery license holder, and that Merapoh’s management would hold the rest.

South Korea’s SK Engineering and Construction [SKEC.UL] has been appointed contractor for the project, Merapoh said.

Source: THANH NIEN Daily, 15 Jul 2009

Petrolimex has made its first oil product purchases from Vietnam’s first oil refinery, the new Dung Quat complex, traders said yesterday.

The state oil product importer secured a total 258,000-324,000 tons of gas oil, gasoline and kerosene for July to December as Vietnam takes the first significant step toward ending its total reliance on fuel imports.

The firm will buy 20,000-25,000 tons of gasoline monthly, and an equal volume of diesel and 3,000-4,000 tons of kerosene.

The 0.25 percent gas oil cargoes fetched a discount of 80 US cents a barrel to Singapore spot 0.25 percent quotes, while kerosene and 92-octane gasoline were sold at a premium of 30 cents to their respective spot quotes.

The refinery is operating at nearly 60 percent of its 140,000 barrels per day capacity. State marketer PV Oil sold the cargoes to Petrolimex, which controls most of the country’s downstream distribution, on a free-onboard (FOB) basis.

“Overall, Vietnamese oil demand is quite stable,” said a trader.

The PV Oil supply will cover 10-30 percent of Petrolimex’s monthly fuel imports.

Prior to the Dung Quat deal, Petrolimex imported a monthly supply of 200,000 tons of gas oil, 150,000 tons of gasoline, 70,000-90,000 tons of fuel oil and 10,000-15,000 tons of kerosene.

Dung Quat was commissioned in February after a 15-year wait and produced its first batch of kerosene, 5,000 cubic meters, in May.

Asia’s oil product prices have been hit by lower imports from Vietnam, the second-biggest buyer of both gasoline and gas oil after Indonesia.

Singapore gasoline crack spread closed 81 US cents lower on Monday at $4.78 a barrel, while gas oil crack spread was at a week low of $6.21 a barrel.

Traders said weaker Vietnamese imports compounded the generally low demand in the region.

Petrolimex last week bought 156,000 tons of gas oil in a quarterly tender for July to September supply, down from 170,000 tons purchased in a second-quarter tender.

Dung Quat, which will meet a third of Vietnamese oil demand, will be capable of producing 250,000 tons of diesel, 30,000 tons of kerosene and 150,000 tons of gasoline every month, when it runs at full steam beginning in August.

Source: Bangkok Post, 20 May 2009

Despite the cyclical downturn of the upstream petroleum industry, PTT Exploration and Production Plc (PTTEP) is confident it can increase petroleum production to 900,000 barrels of oil equivalent per day (boed) by 2020.

The country’s sole petroleum explorer expects output from its fields will rise to 301,000 boed in 2013 and to 900,000 boed seven years later, almost four times the current 240,000 boed.

“The significant rise in production is based on both our 485-billion-baht investment budget for this year to 2013, but also good preparation,” said CEO Anon Sirisaengtaksin.

“We have to focus on increasing our competitiveness against global peers at a time of poor sentiment.”

Cash on hand, human resources and expanding petroleum reserves are the major facets in the company’s bid to achieve its goal, he added.

PTTEP currently operates 40 petroleum projects in 13 countries as a result of its attempts over the past several years to acquire assets and exploration and production (E&P) licences in many countries, including Egypt, Iran, New Zealand and Australia.

The company is negotiating with E&P platform producers to cut payment charges, which are higher than market rates because they were agreed to last year when costs were higher. The price of equipment has fallen sharply since oil prices declined late last year.

“Last year we were worried about a shortage of equipment as each year we need 20-30 platforms to serve our E&P activities,” he said.

Installation costs were about US$20 million each at that time. But as structural steel prices have declined, equipment prices are down by at least 10%, so the company will save a lot of money if it succeeds in its negotiations with the suppliers, he said.

PTTEP currently has cash on hand of approximately 50 billion baht, which it needs to reserve as it foresees fluctuations in crude prices. The company last week announced the country’s largest corporate bond issue worth 40 billion baht last week.

PTTEP is also developing human resources to serve expansion, including geologists, petroleum technicians and engineers through overseas scholarships provided to 20 people, both fresh graduates and professionals each year.

Human resources in this field were in short supply over the past several years, because engineering graduates tended to further their education by seeking degrees in business administration and finance.

“This is because of a perception by students about jobs in this field that they needed to stay on a platform every day,” Mr Anon said.

PTTEP resolved this problem by offering employees experience in other fields by rotating staff.

“We also need to develop the skills of our field employees since they are too young to handle such complicated jobs, particularly overseas projects. We had some success in limited depth level work in the Gulf of Thailand,” he said. PTTEP still plans on recruiting experienced foreign geologists, engineers and technicians to work on overseas projects. Experienced engineers and technicians normally need to spend at least eight years in the field.

“But we need a shortcut to cope with the rising number of overseas projects, so we tend to train them intensively and have frequent job rotation to let them experience difficult tasks and techniques,” he said.

For example, new technology in seismic testing has led to the company to a 70% success rate. But seismic testing expertise needs to be high to keep that success rate. That means that 70% of its wells are commercially viable, higher than the global industry rate of 50%.

“The success rate doesn’t depend on exploration technology alone, but also skillful technicians who can apply different techniques to help us discover more in some wells, so we need to speed up that development,” he said.

PTTEP operates several deep-sea projects in the Andaman Sea, Australia and New Zealand.As well, the company is preparing to adopt new technology for its new business area, floating liquefied natural gas (FLNG) in Australia, in which the company acquired assets and an E&P licence of Australia-based Coogee last year.

PTTEP’s proved reserves at the end of 2008 totalled 944 million boed, excluding its M9 block in Burma and more fields in Australia.

PTTEP shares closed yesterday on the SET at 127.50 baht, up 9.50, in trade worth 3.4 billion baht.

Source: The Jakarta Post, 20 May 2009

Indonesia cannot meet its coal production target in the first quarter of this year due to technical issues, including heavy rain, energy and mineral resources ministry director said.

Bambang Gatot Ariyono, director for coal and mineral development at the energy and mineral resources ministry, said that the coal production in the first quarter of this year was only 30 million tons or lower than the initial target of 50 million.

“Coal companies reports some technical problems hampering their production. Included in the problems is heavy rains,” Bambang told reporters Wednesday.

Despite the lower production in the first quarter, Bambang said Indonesia would still be able to reach the full year production target of 220 million tons.

“Coal companies have said that they will boost their production in the second quarter,” he said.

Source: Bangkok Post, 19 May 2009

Southeast Asian nations have joined East Asian nations to draft a road map for a regional oil stock to avoid disruption in supply, said Dr. Weerawat Chantanakome, energy policy planning councillor for the Ministry of Energy.

The plan concerns the Asean Petroleum Security Agreement (APSA), inked by Asean countries in March to design an appropriate level of inventory of crude for member countries. The expected completion date is 2010.

“How much stock each country will store depends on their will, as each country has its own conditions, level of development and market requirements,” said Dr Weerawat at an energy security meeting in Bangkok held by the International Energy Agency (IEA) yesterday.

Possible options for use as the regional stock include a natural gas pipeline or a power transmission grid designated for use in that region.

For example, the Asean co-development project, a 2,000-kilometre oil and gas pipeline network worth US$1.5 billion, will travel from the west coast of Burma to Yunnan province in China, and will be used as an inventory for crude from the Middle East to China.

Surong Bulakul, senior executive vice-president for PTT, said Thailand learned a lesson about the risk of brownouts last summer as a result of the unexpected drop of natural gas output from the Mataban Sea.

“An emergency can happen with any country, but for any one country to prepare for this, they need a massive budget as it requires development of human resources, regulation improvement and fuel diversification,” he said.

Didier Houssin, IEA director of energy markets and security, suggested Asean look at what happened when Russia, the major natural gas supplier for Europe, had a dispute with the Ukraine, where its pipeline runs to reach the continent. The whole region was damaged, with a three-week suspension of gas transmission.

“We need to secure supply, because the losses from the gas suspension were unbelievable,” he said.

“Because the whole continent depended on a single source [of energy], when it was cut, it was unavoidable for the whole continent to feel the pinch,” Dr Houssin said.

Now European countries have learned to develop their own storage facilities for the next crisis, he said.

Source: The Jakarta Post, 18 May 2009

Publicly listed energy company PT Medco Energi Internasional (Medco) is planning to acquire BP Indonesia’s stake in the Offshore North West Java Sea (ONWJ) block, West Java.

Medco operational director, Lukman Mahfoedz, said on Monday that the company is evaluating the acquisition of the block that mainly produces natural gas.

“We were invited by BP and are evaluating the commercial value (of the acquisition),” he said as reported by Antara state news agency.

Lukman also said that Medco is eyeing on the possibility of sharing ownership of the stake with other companies. He, however, refused to name any.

On the heels of BP Indonesia’s plan to sell its 46 percent shares in ONWJ, several other energy companies are also buckling up to acquire the ONWJ block.

Spokesman for PT Pertamina, Basuki Trikora Putra, said the state oil and gas company had partnered up with PT Indika Energy and prepared internal funding for the acquisition.

Reportedly, PT Energi Mega Persada is also planning to buy BP Indonesia’s shares.

BP Indonesia, a unit of British American firm BP Plc., had planned to complete the divestment by the end of 2009.

The ONWJ concession stretches from Cirebon in the east to the Thousand Islands, Jakarta, in the west.

The block supplies gas to fertilizer company PT Pupuk Kujang, state electricity company PT PLN and state gas company PT PGN.

Other major shareholders in ONWJ include China’s CNOOC with 36.72 percent, Japan’s Inpex with 7.25 percent and Itochu Oil Exploration with 2.85 percent.

Source: The Jakarta Post, 18 May 2009

Indonesia and Vietnam have agreed to increase cooperation in the energy and mineral resources sector following the signing of a new bilateral agreement on energy, oil and coal mining, tempointeraktif.com reported on Monday.

“The two parties have expressed interest in expanding the tripartite cooperation initiative [Petronas/Malaysia, Petrovietnam/Vietnam, dan Pertamina/Indonesia] as a model for cooperation among ASEAN countries,” Oil and Gas Directoral General Evita Legowo said.

She added the government would also be looking into ways to facilitate Vietnamese investments in the country.

The initiative was a byproduct of the Joint Commission on Economic, Scientific and Technical Cooperation ke-5 (JCESTC-5) held in Vietnam’s capital Ho Chi Minh City in late April.

The agreement will also pave the way for education and training exchange in the energy and mineral resources sector, including electricity, coal and renewable energy.