INDONESIA - South Sumatra To Malaysia.

In Aug. 2002 Pertamina, its PSC operators in South Sumatra and Petronas signed an MoU for the supply gas to Malaysia's peninsula. The deal, beginning in April 2005 and spanning 20 years, will be finalised in 2003. Pertamina then said: "During the first year we will supply 100 million cubic feet per day and that will be increased to 300 million cubic feet per day from 2006". The total volume under the MoU is 2.19 TCF. The price will be pegged against the value of fule oil.

The main supplier will be a partnership of Gulf Indonesia (Grissik), Talisman and Pertamina out of the Corridor PSC block, which is to provide 73% of the agreed volume. The other suppliers will be Repsol-YPF and Santos of Australia. In return for its purchase deal, Petronas was allowed to take equity in each of the three blocks.

Petronas in June 2002 bought KM Indonesia, a unit of Kerr-McGee of the US, for $170m. This included KM's 30% non-operating interest in the gas-producing and oil-rich Jabung PSC block in South Sumara. In April 2002 Petronas got the Karapan PSC block off East Java in a 50-50 partnership with Pertamina, with the Malaysian company to be the operator. The block is said to have potential recoverable reserves of 680m barrels of oil and 2.5 TCF of gas. Production is expected to begin in 2004. Petronas' other upstream interests in Indonesia include a 50% interest in ConocoPhillips' Ketapang block, which is contiguous to Karapan. Petronas also has the Tanjung Aru block off Kalimantan.

The Trans-Asean Gas Pipeline (TAGP) project, to involve about $7 bn, was launched on July 5, 2002, in Bali, where the Asean energy ministers signed an MoU providing a broad framework for the member-countries to co-operate towards greater energy security in the region. To be funded by private investment, the TAGP network will link gas supplies to Malaysia, Singapore, Indonesia, the Philippines, Burma, Vietnam and Thailand.

Construction has already begun on several national networks, including the Indonesian export pipelines. Seven new pipelines are to be built between now and 2016, and these should be inter-connected by 2020. The seven pipeline links are: Sumatra to Malaysia; West Natuna to Malaysia; East Natuna to the Joint Development Area (JDA)/Erawan, Thailand; East Natuna to Singapore; East Natuna to Sabah and the Philippines; JDA Block B to Malaysia; and Peninsular Malaysia to Arun, North Sumatra.

Most of the gas supplies are expected to come from Indonesia's reserves, which on July 6, 2002, The Financial Times put at 300,000 BCF. It is forecast that, by 2020, Asean energy demand will be close to 3 bn barrels of oil equivalent, with natural gas to account for 18% of the total.