Conrad Asia Energy agrees to key terms for Mako domestic gas sales

Conrad Asia Energy signs key terms with PGN for domestic gas sales for its Mako field to Indonesia which represents 29.5% of its Mako resources.
Work also underway to finalise the remaining resources at Mako for export gas sales to Singapore.
Agreement paves the way for finalising gas sales agreement before 31 May 2024.

Special Report: Development of Conrad Asia Energy’s Mako gas field in the West Natuna Sea offshore Indonesia has reached a milestone with the signing of binding key terms for domestic gas sales.

Under the binding key terms, the company and PT Perusahaan Gas Negara (PGN) – the gas subsidiary of Indonesian national oil company PT Pertamina – will agree in good faith and sign a fully termed gas sales agreement by the end of May 2024.

Mako has a best estimate (2C) contingent resource of 413 billion cubic feet of gas that can be quickly brought into production through the existing West Natuna pipeline which carries gas from three third-party production facilities in the South Natuna Sea to an onshore receiving facility in Singapore.

Singapore relies on gas for 95% of its power needs and is scheduled to build four new gas-fired power stations over the next two years, ensuring that there will be a market for selling Mako gas.

Conrad Asia Energy (ASX:CRD), which holds a 76.5% operating interest in the Duyung production sharing contract that hosts Mako, has already awarded a plan of development for the field, completed front end engineering design, and agreed to key terms for a gas sales agreement with Sembcorp Gas and SKK Migas – the Indonesian upstream regulator.

Indonesia’s Minister for Energy and Natural Resources also approved in February the volumes and prices for both domestic and export gas sales, which had cleared the way for the company to finalise gas sales agreements.

The Duyung PSC that hosts the Mako gas field. Pic supplied (CRD)

Closing in on domestic gas sales

The binding key terms that CRD and PGN entered into commits them to agree to and sign a gas sales agreement for the domestic portion of gas produced from the Mako field, which accounts for about 29.5% of total sales volumes until the PSC expires in January 2037.

CRD notes that the sales agreement is subject to the construction of the pipeline connecting the West Natuna Transportation System with the domestic gas market in Batam. Mako discovered by Conrad is currently the largest undeveloped field in the West Natuna area and hence represents a reliable and secure gas sales option for regional markets as well as diversification from increasing LNG imports.

“Conrad has been working closely with PGN for the commercialisation of Mako gas. These key terms are a very important milestone paving the way for a fully termed gas sales agreement and brings the company a step closer to the FID for the Mako development,” managing director Miltos Xynogalas said.

“This agreement, combined with Conrad’s recent signing of a memorandum of understanding for its Aceh gas resources also with PGN, will further advance the Government of Indonesia’s ambition to meet the fast-growing energy needs of the country.”

Next steps

Besides moving to sign a domestic gas sales agreement with PGN, CRD will also move to finalise an export gas sales agreement with Sembcorp Gas and SKK Migas over the coming months.

These agreements will in turn underpin a final investment decision by the middle of this year.

This article was developed in collaboration with Conrad Asia Energy, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.