JAKARTA (RAMBUENERGY.com) – Andalas Energy and Power Plc, the AIM listed Indonesian focused upstream oil and gas and power company (AIM: ADL), has signed an agreement with PT Pertamina (Persero), Indonesia’s state owned energy company to establish a joint working and steering committee with the objective to fast-track commercialization of marginal gas fields within Pertamina’s acreage in Indonesia.
The execution of this agreement represents substantial progress by Andalas in the implementation of its gas-to-power strategy with a world-class partner. Pertamina, listed in the global Fortune 500, is Indonesia’s national energy company and holds an unrivalled position within the country’s energy industry.
Andalas said in a statement that the agreement is in line with Andalas’ plan to utilize its team’s expertise and local knowledge to make a significant contribution at the local level towards fulfilling the Government of Indonesia’s goal of reducing the country’s power shortfall. Indonesia is seeking to increase electricity capacity by 35,000 Megawatts (‘MW’) by 2019.
Agreement recognizes that Pertamina and Andalas’ personnel have a proven track record in monetising gas fields in Indonesia;
The initial focus will be to identify at least five stranded gas fields within Pertamina’s acreage in Riau, Jambi and South Sumatra provinces which are suitable for sub-100 MW gas-to-power development in the form of an independent power project (‘IPP’);
All target areas have an abundance of stranded gas fields that ADL has identified;
All field and IPP development plans will be based on modular/mobile power plants (‘MPPs’), a proven technology that is cost-effective, flexible, scalable and ideal for satisfying power demand at the local level in a wide range of operating environments;
Once the initial five fields have been identified both parties will sign an exclusive joint development agreement (‘JDA’) to design, construct, fund and operate the IPPs – suitable partners may be invited to join Pertamina and Andalas in the JDA for each development; and
Both parties will work together to generate IPP commercialisation plans for each of the identified marginal gas fields covering all key aspects of any future investment and approval; covering project design, project cost and economic analysis and all regulatory requirements.
Upon successful completion of this work, it is intended both parties will sign a JDA to design, construct, fund and operate each IPP. In conjunction with this, the partnership will work to generate plans and applications that are suitable for submission to PLN for approval and inclusion in its 10-year plan.
“Working in partnership with Pertamina, the Indonesian national energy company, is in our view a testament to the strength of Andalas’ gas-to-power business concept and the caliber of both our Board and local management team, who have an intimate understanding of the country’s energy sector. Andalas already has the team and network to make sure the partnership has at its disposal everything needed to deliver the targeted IPP commercialization plans,” Andalas CEO, David Whitby, said.
“Together with our ongoing initiatives at TOE, this Agreement with Pertamina promises to fast track our strategy to build an integrated gas-to-power producer with a portfolio of interests which have the potential to generate significant value for shareholders. As a result, we very much look forward to working closely with Pertamina to deliver projects that will not only help us achieve our objective, but importantly will benefit the people of Indonesia,” he said.
The smaller sub-100 MW gas-to-power projects are ideally placed to play a major part in helping the Government of Indonesia meet its objectives focusing at the grass roots level. Such projects provide a rapid, inexpensive power generation option through the use of existing small, modular, potentially mobile, off-the shelf, fit-for-purpose equipment which can be swiftly tied-in to PLN’s national power transmission network. In addition, an IPP can be designed and built according to the size of the gas reserves.
As part of the gas-to-power proposition, Andalas and Pertamina propose using MPPs, a proven technology that is in-place in Indonesia today. As well as being much quicker to implement than conventional power projects, MPPs can be executed in locations that have the greatest need, require a small land footprint, and can be completed on a leasing model, thereby reducing capital expenditure requirements.
As a result, MPPs offer a highly attractive technical and economic solution for a company like Andalas, which will play an important role in assisting the Government with its targets. As an illustration, a 25 MW power station requires approximately 25 Bcf of gas to supply electricity to an estimated 40,000 homes which positively impacts the lives of many thousands of families.