INDONESIA - Pepua - BP.

The frontier province of West Papua (ex-Irian Jaya), where an exploration well can cost up to $40m, has become an important gas zone. Arco, taken over by BP in 1999, found gas fields in the Wiriagar and Berau Blocks in Bintuni Bay, in the west of Papua. The most important is Wiriagar Deep, a super-giant with over 13 TCF of gas in a Pre-Tertiary formation which only has 10% CO2, found in 1995. In 1997, Arco teamed up with British Gas (BGI) which found a huge gas field at Vorwata, adjacent to Wiriagar in the Muturi Block. The two fields are connected. In 1998, Arco took another two blocks off Irian Jaya. The three blocks - Wiriagar, Berau and Muturi - make up the integrated $5-5.5 bn Tangguh gas E&P/LNG project. In mid-2001, the Japanese trading giant Mitsubishi Corp. bought Occidental Petroleum's 22.856% stake in Berau for $480m which gave it 16.3% in Tangguh LNG (see Vol. 60, No. 10).

BP on March 7, 2005 gave the go-ahead for its Tangguh LNG project as it signed the onshore and offshore EPC contracts. Tangguh is set for output capacity equivalent to 6% of current world demand for LNG. Slated to start production by end-2008, it represents a core profit centre for BP as LNG demand booms. For Indonesia, the world's biggest supplier of LNG, it will help offset declining output from other LNG facilities and provide much-needed revenue.

"[The contracts] have been signed, so the project can go ahead", Lukman Mahfoedz, BP vice president for Tangguh LNG in Jakarta, told Reuters. Mahfoedz said the EPC contracts for onshore work had been signed with a consortium led by Kellogg, Brown & Root (KBR), a unit of the US giant Halliburton. The other members are JGC Corp. of Japan and Indonesian firm PT Pertafenikki Engineering. Italian engineering group Saipem, controlled by ENI, won the contract to build offshore installations and pipelines. Mahfoedz in January put the combined value of the contracts at $2.3 bn.

The Mines and Energy Ministry earlier said it had granted an extension to BP's PSCs covering the three gas fields. Novian Thaib, a director at the ministry, told Reuters the PSCs' extension was to 2035. The extension agreement was signed on March 4.

Mahfoedz confirmed Tangguh will consist of two trains with combined annual capacity of 7.6m tons/year. The contracts were among final elements to be agreed before BP could begin construction. BP's partners in Tangguh are CNOOC and several Japanese firms, including Inpex, Sumitomo, Kanematsu and Mitsui. The project is the most important in BP's Asia/Pacific gas portfolio, one of six new core profit centres it has identified. The JV, 3,000 km east of Jakarta, has LNG supply contracts with China, Mexico and South Korea.