As the world faces the energy transition that has become a necessity, several nations are developing new gas projects as the sector experiences a surge in demand, particularly in the Asian market. Conrad Asia Energy has taken a step towards a major milestone in its Indonesian ambitions, as the company has signed a binding gas sales agreement with PT PLN Energi Primer Indonesia (PLN EPI), a wholly owned subsidiary of Indonesia’s state-owned electric utility company.
The new deal is a landmark achievement for the Indonesian gas sector
The new deal provides the company with the opportunity to secure the sale of gas from Indonesia’s Mako Gas Field for domestic use through January 2027, paving the way for a long-term relationship between the two companies.
The deal between Conrad and PLN consists of a total contract quantity of 392 TBtu, with an allowance for sales up to 111 Bbtu. The strategic deal encompasses the entirety of Mako’s 2C Contingent Resources of 376 Bcf, of which a significant amount is earmarked for Conrad.
To foster the development of the deal, and as a huge bonus for Conrad, PLN has opted to finance and construct the pipeline infrastructure from the West Natuna Gas line to Pemping Island and further onward to Batam. Conrad Asia will bear no costs for the pipeline construction, this is certainly does not follow industry standards and paves the way for an extremely profitable project for Conrad.
“The gas sales agreement with Conrad Asia Energy is a significant milestone both in the development of Conrad and in our progress to bringing the Mako Field into production. The signing of the GSA underpins the financial viability and crystallises the value of the Mako Field,” – Conrad Managing Director and CEO Miltos Xynogalas
The new gas purchasing deal comes with some unusual gas pricing arrangements
For any long-term gas project, ensuring a stable purchasing price can often be a challenge; however, the strategic deal between Conrad and PLN specifically states that the Mako gas price will be linked to the Indonesian Crude Price (ICP), which is a far departure from traditional Indonesian gas purchasing deals in the past.
Important to note is the fact that the entirety of the gas produced from Mako will be sold at this premium price, instead of the usual fixed domestic offtake price. Notably, the Indonesian Ministry of Energy and Mineral Resources has revoked a previous directive to sell Mako gas to PT Perusahaan Gas Negara Tbk and Sembcorp Gas Pte Ltd, with those deals pushed to the side in favor of the new deal with Conrad.
Fast-tracking the development may come with some challenges, but overall, both companies are satisfied with the new gas sales agreement.
“Asia has the fastest gas consumption growth in the world and continues to progress on its energy transition path away from coal. We are extremely proud to participate in and support Indonesia’s ever-growing exploitation of its natural gas resources. The resultant strong gas demand in Indonesia underpins the tangible value of our discovered resources and provides a compelling investment thesis for Conrad.” – Conrad Managing Director and CEO Miltos Xynogalas
The international gas sector has seen some substantial investments in recent months
The Asian consumption of gas has grown well beyond expectations in recent months as several large energy companies report increasing levels of demand for gas across the region. The surge in gas production has not been limited to Asia or Indonesia, though, as Norway has now outlined its plans to invest billions in a new North Sea development, underscoring the international sentiment towards the gas sector. With the Indonesian deal nearing a Final Investment Decision, Asia’s gas sector is set to receive a boom in production.
