0 SKMigas Seeks to Gain Market Intelligence With Restructure

It may still notionally be a temporary body, but the oil and gas regulator — hastily established late last year after its predecessor was stripped of its power by a court ruling — is looking like an increasingly permanent part of the regulatory landscape. SKMigas on Friday announced a major reorganization of its structure, including the establishment of a new division, called commercialization control, that is tasked with improving the regulator’s knowledge of the market. 

Recently appointed SKMigas head Rudi Rubiandini said the new unit was created to boost the regulator’s marketing capacity. “Aside from handling all things related to the sales of oil and gas ... the division is also tasked with evaluating the economical value of a field in production phase,” he said. Rudi said the new division would enable SKMigas to conduct a thorough assessment when the contract over an oil field expires, offering better quality information to the government. 

The new division is headed by Widhyawan Prawiraatmadja, who was previously the regulator’s deputy for planning. Gde Pradnyana, who previously served as the deputy for operations and is now as the secretary at SKMigas, compared the new position with that of a market intelligence chief. “It will evaluate the market. It will make an assessment on when will we develop a field,” he said. “The process of commercialization is as important as the process of exploration,” Gde said, adding that the new division will ensure that Indonesia gets the market price for its assets. 

A lack of market intelligence is apparent in the low selling price that Indonesia gets from shipping liquefied natural gas produced in Tangguh plant in West Papua to Fujian, China. Based on a contractual agreement last revised in 2006, the LNG sells for $3.35 per million British thermal unit (mmbtu), while Japan’s LNG import price topped $17 per mmbtu last month. Exports to Fujian accounts for 11 percent of the total production of 7.6 million tons per year from the Tangguh field, which is operated by British resources giant BP. Revenue from the sale of Tangguh LNG to Fujian reaches only $931 million a year due to the price agreed to in the contract. 

By comparison, Tangguh LNG exports to Taiwan, which accounted for 9 percent, generated $1.8 billion in revenue. The China contract includes a provision that the price be revised every four years, and the government has formed a team to negotiate for a better price. SKMigas was formed after a court ruling undermined the legislation establishing its predecessor, BPMigas. It is tasked with setting oil production targets.

source : the jakarta globe