News focus: Malaysia claims Ambalat for its oil reserves

by Andi Abdussalam

(ANTARA News) - When tension heightened between Indonesia and Malaysia over the Ambalat Block back in 2005, Kuala Lumpur offered a joint cultivation of the area and divide the proceeds.

For Indonesia, however, the Ambalat issue is a matter of sovereignty so that no meeting point has been achieved so far. Malaysia puts Ambalat more in the economic perspective, while Jakarta more on sovereignty.

Malaysian Defense Minister Sri Ahmad Zahid Hamidi said the dispute on Ambalat was not a border dispute but an economic one. It is believed to hold large oil reserves. Near the Ambalat border, the Aster field is believed to have the potential to produce 30 thousand to 40 thousand barrels of oil per day.

"This is the real problem. If it is only a matter of borderline, possibly it has been solved long ago. But there is economic potential so that we have to be serious and careful," Hamidi said as quoted by Indonesian legislator Effendi Choirie who met him in Putrajaya Saturday.

But for Indonesia, sovereignty is important. That`s why Indonesian leaders are firm in maintaining the country`s claim over the block area which covers about 15,235 sq km in the Sulawesi Sea.

"Talking about Ambalat means that we are talking about the sovereignty of the Republic of Indonesia. We have to support the efforts of the incumbent president," Prabowo Subianto, a vice presidential candidate for the upcoming presidential elections, said.

He said that there should be no difference of opinions among the people with regard to the country`s sovereignty.The same voice was also aired by the Indonesian military.

The Ambalat Block is part of the Unitary State of the Republic of Indonesia (NKRI) based on the United Nations Convention on the Law of the Seas (UNCLOS), the Indonesian Military (TNI) said.

"Whoever enters the area (without permission) violates the sovereignty of the Republic of Indonesia," TNI Headquarters spokesman Commodore Sagom Tamboen said.

He said the TNI had never stated that the Ambalat Block was an area in a disputed status. "The Ambalat Block is part of the Unitary State of the Republic of Indonesia based on the international law of the seas," he said.

Therefore, the Indonesian military would continue to carry out safeguarding operations in the area, which Malaysia claims based on a 1979 maritime map.

In spite of increasing tensions in the border area, both sides are still able to take the situation under control. According to Chief Political and Security Minister Widodo Adi Sucipto, the security situation in the Ambalat Block remain under control.

"I think it is now under control," the minister said.However, Widodo did not explain in detail the latest situation in Ambalat after several violations by Malaysian navy ships which often trespassed the Indonesian territorial waters in East Kalimantan in the past several days.

Legislators from the House Commission I for foreign affairs who flew to Malaysia on Monday for a meeting with their Malaysian counterparts, also have in mind that Ambalat belonged to Indonesia.

The House of Representatives (DPR) and the government share the view that the Ambalat Block belongs to Indonesia so that there must be no compromise with regard to Indonesia`s ownership of the oil rich area in Sulawesi Sea, Deputy Chairman of House Commission I for foreign affairs Yusron Ihaza Mahendra said.

"The government also gives full support to the efforts made by House Commission I to have meetings with its Malaysian counterparts and other high officials in Malaysia," Yusron Ihza Mahendra said on Sunday.

"The president, on behalf of the government, expressed full support to the steps taken by the delegation of House Commission I to visit Malaysia to discuss the Ambalat issue," the legislator said.

The Commission I attended a joint meeting with the president and the ministers in charge of politics, legal and security affairs. In the meeting, the president reaffirmed the government`s firm stance that there would be no compromise on matters relating to the country`s sovereignty.

The president also hoped that Malaysia would stop its provocations which could fuel further tensions. Therefore, the Indonesian government called on Malaysia to respect the ongoing process of negotiations.

"At a time when negotiations are still underway, we hope that all parties can respect the ongoing talks," Political, Legal and Security Affairs Coordinating Minister Widodo AS said.

However, the rising tensions between the two sides were not expected to end up in wars.

"We will not go to war against Indonesia. After all, the uniforms of the Malaysian Army are produced by Sritex of Indonesia. How could we be at wars?," Malaysian Defense Minister Sri Ahmad Zahid Hamidi said.

The Malaysian defense minister made the statement spontaneously at a meeting with House Commission I member Effendi Choirie.

Choirie, who met the Malaysian defense minister with his friends Ali Mochtar Ngabalin (a Commission I member) and Ade Daud Nasution (a former member of the House Commission), delivered two important messages to the Malaysian government.

He said that he and friends delivered a protest against the provocations of the Malaysian patrol boats in Indonesia`s water territories in Ambalat Block. Besides, he also specifically asked the Malaysian defense minister to use his influence as a defense minister to help speed up the settlement process of the conflict in Ambalat.

"As the third most important person in Malaysia, we asked him to help foster friendship, so that all problems could be solved as soon as possible," Choirie said.

The defense minister even happened to make a joke saying that how could Malaysia go to war against Indonesia if its (military) uniforms were produced by Sritex, referring to Indonesia`s textile firm which among others produces military uniforms.(*)

Indonesia urges Eni to develop disputed block

(Reuters) - Indonesia wants Italian oil group Eni to press ahead with developing the Bukat block in the Ambalat area off Borneo, where there is a border dispute with Malaysia, the energy minister said on Friday.

Indonesia has said Eni has found a big oil reserve in the Ambalat area, near Indonesia's border with Malaysia, that could produce 30,000-40,000 barrels per day (bpd) of crude oil.

Last October, the Indonesian minister said Eni was considering building a floating liquefied natural gas (LNG) plant in Bukat, as the operator also found natural gas there.

"The Ambalat area is Indonesian territory. All our programmes and planning will continue there. We want Eni to develop the Bukat block," Minister Purnomo Yusgiantoro told reporters.

Indonesia and Malaysia are embroiled in a long-running dispute over Ambalat, which is off the east coast of Borneo, and both sides have handed out contracts to major foreign firms in the area.

Indonesia awarded ENI a production sharing contract in 1999 and Unocal in 2004, which was later bought by U.S.-based Chevron , while Malaysia in 2005 struck an exploration deal with Royal Dutch Shell Plc and Malaysian state firm Petronas [PETR.UL].

The navies of both countries have faced off several times in recent weeks in the area, with Jakarta saying that it nearly opened fire on May 25 on a Malaysian patrol vessel.

Malaysia sent its armed forces chief Abdul Aziz Zainal to Jakarta this week in a bid to cool tensions. [ID:nJAK428633]

An Indonesian official at the energy ministry said Ambalat potentially had big oil and gas reserves.

"For oil reserves it may be at least 400 million barrels in Bukat alone," said the official, who declined to be identified.

Officials from Eni, which has not done any drilling in the Ambalat block so far because of the border dispute, could not immediately be reached for comment.

Yusgiantoro has said previously the the government has given full support, including security back-up if needed, for Eni's operations.

The development of the Bukat block could provide a much-needed fillip for Indonesia.

Southeast Asia's biggest economy has turned into a net importer of crude oil in recent years, as its failure to develop new fields quickly has led to a slump in production.

(Reporting by Muklis Ali; Editing by Ed Davies and Clarence Fernandez)

Scramble for coal assets in Indonesia

By Sundeep Tucker and John Aglionby

Some of the world’s largest energy groups are scrambling to acquire coal mining assets in Indonesia as family-run conglomerates consider divestments to raise cash.

People familiar with the matter said the most advanced example involved Berau Coal, a leading producer, whose majority owner is seeking indicative bids for its stake, with valuations expected of up to $1.5bn.

The stake sale could be combined with an market listing, with a final decision on whether to seek a flotation expected next month.

Peabody Energy, the US coal miner, and Xstrata, the Anglo-Swiss miner, are believed to be among those interested in becoming a cornerstone investor in Berau Coal, according to people familiar with the matter.

Industry analysts said Chinese, South Korean, Indian and Middle Eastern companies were also scouring Indonesia, the world’s largest exporter of thermal coal, for assets. Many are, however, waiting for the publication of implementing regulations to a new mining law before signing deals.

Benchmark thermal coal spot prices are at their highest level in three months and 2011 futures are at $95, their highest level in six months as global demand, particularly from China, starts to revive.

Indonesia’s coal production in the first quarter of 2009 was 30m tonnes, well below the 50m-tonne target. But officials are confident that as the weather improves the full-year target of 220m tonnes should still be achievable.

The majority stake in Berau Coal is owned by Armadian Tritunggal – an investment company controlled by Indonesian businessman Rizal Risjad – with the sale auction run by Deutsche Bank, Merrill Lynch and PacBridge Capital Partners, a boutique advisory firm.

Berau Coal has a 1,200 sq km concession in Indonesia’s East Kalimantan province and produced 13.2m tonnes of coal in 2008. It aims to increase this figure to at least 15m tonnes this year.

People familiar with the matter said the owners of Buma Coal, a coal services provider, were also looking for a buyer and had hired Merrill Lynch to consider the options.

Indonesia’s two largest coal companies, Adaro Energy and Bumi Resources, have recently acquired coal services companies to integrate their operations further.

Adam Worthington, a resources analyst with Macquarie Securities, said: “We believe that consolidation is going to be an ongoing theme and China is going to play a prominent role.”

Dealmakers said they had been in talks with the owners of at least four Indonesian coal groups that were at various stages of seeking foreign investment.

“We think that a lot of deals will be struck in the second half of this year,” said one dealmaker.

Copyright The Financial Times Limited 2009

Indonesia Cepu Block Peak Output Likely Delayed 2 Yrs To 2014

JAKARTA (Dow Jones)--The Indonesian government has pushed back the scheduled target for the Cepu Block to produce 165,000 barrels of crude oil per day to 2014 from 2012 due to problems related to land clearance and getting permits from the local government, an official said during the weekend.

"The target of 20,000 barrels a day would be reached by the end of the 2009," Abdul Muin, deputy chairman of the upstream oil and gas regulator BP Migas told Dow Jones. "This is also pushed back from the original target of July 2009."

Mobil Cepu Ltd., a venture between Exxon Mobil Corp. (XOM) and the state-owned PT Pertamina, has suspended crude oil production from the Block since late March, as the local government has yet to give a permit to build a pipeline to carry the oil to storage tanks, Eddie Purwanto, BP Migas's deputy chairman for operations told Dow Jones in April.

The latest setback for Mobil Cepu's operations in the block, which is estimated to contain 600 million barrels of oil, could further dim the government's prospects of significantly boosting the country's crude oil production from around 980,000 barrels/day currently, and quickly reclaiming the country's status as a net oil exporter.

By Deden Sudrajat, contributing to Dow Jones Newswires

FACTBOX-Indonesia's LNG industry and upcoming gas projects

JAKARTA, June 1 (Reuters) - Indonesia, the world's third-biggest liquefied natural gas (LNG) exporter, is due to begin delivery from the Tangguh project in Papua in late June, helping offset falling output in other ageing fields.

The global economic crisis has pushed down LNG demand around the world and means that Indonesia, which is behind Qatar and Malaysia as an exporter, should have more available to supply, particularly with the Tangguh project coming on stream.

In the past, Jakarta has sometimes failed to meet its contractual commitments to traditional markets such as Japan, South Korea and Taiwan, often agreed more than a decade ago, as it has sought to switch more supply to the domestic market.

Here is an outline of Indonesia's LNG industry and upcoming gas projects:

Existing projects

BONTANG - LNG production began at the Bontang plant in East Kalimantan in 1977. Bontang, one of the largest plants in the world, has 8 trains and a capacity of 22 million tonnes a year (tpy), but output has declined due to a lack of available natural gas. Vico Indonesia, jointly owned by BP (BP.L), Italy's Eni (ENI.MI), Chevron (CVX.N) and Total (TOTF.PA), supplies gas to Bontang. The plant is expected to produce about 17.2 million tonnes in 2009, down from 17.7 million in 2008.

ARUN - Indonesia also launched LNG production at its Arun complex in Aceh province in 1977, with 6 trains and a capacity of around 12 million tpy. Since 2000, LNG production at Arun has fallen as natural gas supplied by Exxon Mobil (XOM.N) declines. Arun is expected to produce 2.3 million tonnes of LNG in 2009, about the same in 2008.

Planned projects

TANGGUH - The BP-led project is due to be the country's third LNG centre with a capacity to produce 7.6 million tpy through 2 trains. Tangguh has several foreign supply contracts, including a 2.6 million tpy contract with China National Offshore Oil Corp (CNOOC) (CEO.N) (0883.HK). U.S. firm Sempra Energy (SRE.N) also has a 20-year contract to lift 3.6 million tpy with the right to divert half to customers other than its own terminal in Mexico. There are also supply contracts with South Korean firms K-Power and POSCO (005490.KS).

KUTAI BASIN - Chevron Corp (CVX.N) is due to decide whether to move to final design on the Kutai Basin natural gas project off East Kalimantan by the end of 2009 and a final investment decision is likely in 2011. The Makassar Strait project would have the deepest offshore gas fields in Indonesia, at depths ranging from 2,500 to 6,000 feet (760-1,800 metres). Chevron had said it plans an investment of about $6 billion in the fields, which have combined natural gas reserves estimated at over 3 trillion cubic feet (tcf). Indonesia's energy minister said the project had agreed to supply up to 25 percent of gas to domestic users, which could provide 0.7-0.8 million tonnes of LNG a year. Some of the gas from Kutai will also be supplied to Bontang.

MASELA - Japan's Inpex Corp (1605.T) is proposing to build a floating LNG plant in Indonesia's Timor Sea at a cost of around $10 billion to exploit its Abadi field in the Masela block. The field is estimated to have more than 10 trillion cubic feet of natural gas reserves and is expected to be on stream in 2016.

NATUNA D-ALPHA - Indonesia's state energy firm Pertamina expects the Natuna Sea natural gas project to come onstream in the next 8-9 years. The Natuna D-Alpha block, which has about 222 trillion cubic feet (tcf) of gas reserves and will require about $40 billion investment, is the subject of a dispute between Exxon Mobil and the government. Indonesia said last year it had awarded Pertamina the operating right, but Exxon has said its contract is valid until 2009. Pertamina does not have the technical expertise or financing to develop the project alone and has named eight firms -- Petronas [PETR.UL], Exxon Mobil, Chevron, Total, Royal Dutch Shell (RDSa.L), StatoilHydro (STL.OL), Eni and China National Petroleum Corp -- as potential partners.

DONGGI-SENORO - Pertamina, Indonesian energy firm Medco (MEDC.JK) and Japan's Mitsubishi Corp. (8058.T) have agreed to build the $1.4 billion Donggi-Senoro LNG plant in Sulawesi, with a capacity of 2 million tonnes per year. It will receive natural gas supplies from Pertamina and Medco. The government, Pertamina and Medco are still in negotiations reviewing the natural gas price to the plant, which is expected to be operational in 2012 or 2013. (Compiled by Muklis Ali and Ed Davies; Editing by Michael Urquhart)