Sembcorp Agrees Key Terms for Gas Supply from Indonesia's Mako Field

West Natuna Exploration Ltd. (WNEL), a wholly owned subsidiary of Conrad Asia Ltd., has signed a non-binding key terms agreement with Singapore’s Sembcorp Gas Pte. Ltd. for gas supply from the Mako gas field in Indonesia.

WNEL is the operator of the Duyung production sharing contract (PSC) covering the Mako gas field. The agreement has been endorsed by SKK Migas, the country’s petroleum upstream regulator.

The key terms of the non-binding agreement relate to approved gas production from Mako starting in 2025 until the end of the Duyung PSC in 2037 for a total sales gas volume of approximately 293 billion cubic feet (Bcf) with the potential to increase to approximately 392 Bcf, according to a recent news release from Empyrean Energy plc, which is a partner in Duyung PSC. Gas sales will be priced against Brent oil, according to the release. The parties will focus on finalizing a definitive gas sales agreement in the coming months, Empyrean said.

The Mako gas field, located in the Duyung PSC in the Natuna Sea, Indonesia, has been independently estimated by Gaffney Cline & Associates in 2022 to contain gross 2C contingent resources of 413 Bcf. It is currently the largest undeveloped gas resource in the West Natuna Sea, lying near the West Natuna Transportation System, according to the release.

"Empyrean is delighted that agreement has been reached between the operator of Mako and a major gas utility and that the agreement has been endorsed by the Government of Indonesia's petroleum upstream regulator”, Empyrean CEO Tom Kelly said. “Focus will now be on converting this significant milestone into a binding gas sales agreement. The existing terms will be welcomed by those parties currently participating in the sell-down process to fund the development of the Mako gas field. The Mako gas field is the largest undeveloped gas discovery in the West Natuna Sea and is considered significant for energy security in the region and the transition from coal to cleaner sources of energy”.

“Mako will provide reliable long-term gas supplies at a time when secure gas with lower carbon emissions (compared with LNG) has become an important component to energy security and transition. Indonesia has a stated objective of doubling its gas production by 2030, with Mako expected to be a contributor to that objective as well as providing valuable foreign income to Indonesia”, Empyrean said in the release.

WNEL holds a 76.5 percent participating interest in the Duyung PSC, with Empyrean and Coro Energy Duyung (Singapore) Pte. Ltd. holding 8.5 and 15 percent, respectively.

Conrad and Empyrean discovered Mako in 2016, and since that time have delineated the resource through successful appraisal drilling. Mako partners received formal approval from the Indonesian government for a revised development plan in late 2022, the release said.

In June, Sembcorp signed a deal to import natural gas from Medco E&P Natuna Ltd., a unit of Indonesian oil and gas company PT Medco Energi Internasional Tbk. The agreement to import natural gas piped from the West Natuna gas fields was estimated at $1.41 billion (SGD 1.9 billion), Sembcorp said in an earlier news release. The company expects the agreement to come into effect by the second half of 2023, conditional upon the necessary agreements to transport the new supply of gas. Delivery is expected to begin in 2024 for four years.

The West Natuna Transportation System is a 403.9-mile (650-kilometer) natural gas pipeline that carries output from three production facilities in the South Natuna Sea near Indonesia to an onshore receiving facility in Singapore.

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