Total May Spend $8 Billion to Tap Remaining Indonesian Reserves
By Leony Aurora
Dec. 20 (Bloomberg) -- Total SA, Europe's third-largest oil company, expects to spend $8 billion over the next nine years to tap its remaining reserves in Indonesia and supply the nation's largest liquefied natural gas plant in Borneo.
Fields of Total E&P Indonesie and partner Inpex Holdings Inc., which produce enough to meet 40 percent of Japan's demand, have about 13 trillion cubic feet of reserves left after pumping 10 trillion cubic feet since starting up in the 1980s, Total Indonesie President Philippe Armand said in Balikpapan, East Kalimantan province, yesterday.
The partners have pushed output to a plateau of as much as 2.7 billion cubic feet a day amid dwindling supplies to the LNG plant from Chevron Corp. and a joint venture of BP Plc and Eni SpA. Reserves in fields operated by Total, including Tunu and Peciko, may keep producing for another quarter century provided the shareholdings and prices give an adequate return on the investment, Armand said.
``Reserves is an economic concept,'' Armand said. ``If the price is down, if the profit isn't shared with the companies, they're not going to invest.''
Total will start producing gas from two new fields, Sisi and nearby Nubi, next year to slow the inevitable decline in output as other fields age, he said. The company expects to ship about 300,000 barrels of oil equivalent a day in 2015, compared with about 560,000 barrels oil equivalent a day at present, Total said in a presentation to journalists.
Still, the project will last for a ``generation to come,'' Armand said.
Japanese Customers
Indonesia may not extend contracts to supply 12 million tons of LNG a year to Japanese buyers after they expire in 2010 because it wants to divert the exported gas to the domestic market, Energy Minister Purnomo Yusgiantoro said on Feb. 8. Gas prices are currently sold at below $3.5 per million British thermal units, about a third of export prices.
Total accounts for about 75 percent of the gas requirement of PT Badak NGL's plant in Bontang, the world's largest until 2004. Increased output from fields operated by Total hasn't been enough to offset lower supplies from Chevron and Vico Indonesia, a joint venture between BP and Eni, causing Indonesia to cut its shipments to buyers.
To contact the reporter on this story: Leony Aurora in Balikpapan at laurora@bloomberg.net
Last Updated: December 19, 2006 16:16 EST
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