Conrad Asia Signs 392 TBtu Gas Sales Contract with PLN EPI Through 2037
Conrad Asia Energy has inked a binding gas sales agreement with Indonesia’s PLN EPI for the entire output of its Mako Gas Field, marking a pivotal step towards production and domestic market integration.
- Binding Gas Sales Agreement signed with PLN EPI for Mako Gas Field output
- Contract covers 392 TBtu of gas until January 2037 with daily sales up to 111 Bbtud
- Gas price linked to Indonesian Crude Price, replacing previous agreements with PGN and Sembcorp
- PLN EPI to finance and build pipeline infrastructure at no cost to Conrad
- Agreement supports pending farm-out and final investment decision for Mako development
A Landmark Agreement for Mako Gas Field
Conrad Asia Energy Ltd (ASX, CRD) has taken a significant stride in its development journey by signing a binding Gas Sales Agreement (GSA) with PT PLN Energi Primer Indonesia (PLN EPI), a subsidiary of Indonesia’s state-owned electricity company. This deal secures the sale of all natural gas produced from the Mako Gas Field under the Duyung Production Sharing Contract until January 2037, covering a substantial volume of 392 trillion British thermal units (TBtu).
The agreement not only guarantees a steady domestic market for Mako’s gas but also aligns pricing with the Indonesian Crude Price (ICP), an oil-linked index akin to Brent crude. This linkage is notable as oil-indexed pricing for domestic gas contracts in Indonesia is relatively rare, signaling a progressive approach by the Indonesian government to balance producer economics with local energy needs.
Strategic Implications and Infrastructure Support
PLN EPI will finance and construct the pipeline infrastructure connecting the West Natuna Gas line to Pemping Island and onward to Batam, a key energy demand hub driven by data centre growth. Importantly, Conrad will not bear any costs related to this pipeline, reducing capital expenditure risk for the company. This infrastructure commitment underscores PLN EPI’s role in ensuring reliable energy supply chains across Indonesia.
The Indonesian Ministry of Energy and Mineral Resources has revoked previous directives that allocated Mako gas sales to PT Perusahaan Gas Negara Tbk and Sembcorp Gas Pte Ltd, terminating those prior agreements. This consolidation under PLN EPI simplifies the sales framework and strengthens Conrad’s position in the domestic market.
Supporting Development and Future Growth
Conrad’s Managing Director, Miltos Xynogalas, highlighted the GSA as a milestone that crystallises the financial viability and value of the Mako Field. The agreement is expected to underpin the company’s pending farm-out arrangements and the final investment decision (FID) for Mako, which will determine the timing of first gas production.
With a 76.5% participating interest in the Duyung PSC, rising to 91.5% post-transfer, Conrad controls a significant portion of the Mako gas resources. The contract allows for a plateau production rate of up to 111 billion British thermal units per day, equivalent to approximately 112 million standard cubic feet per day, covering the entirety of Mako’s 2C contingent resources.
Looking beyond Mako, Conrad is positioning itself as a key player in Asia’s fastest-growing gas market, with additional gas discoveries in the Aceh region. The company’s strategy of acquiring undervalued assets and advancing them through cost-effective development aligns well with the region’s energy transition away from coal.
A New Chapter in Indonesia’s Energy Landscape
This agreement reflects Indonesia’s evolving energy policy, which aims to secure cleaner energy supplies while supporting domestic producers. By linking gas prices to oil benchmarks and consolidating sales through PLN EPI, the government is fostering a market environment conducive to investment and sustainable growth.
For Conrad, the GSA not only secures a critical revenue stream but also enhances its credibility and attractiveness to potential farm-in partners. As the company advances towards production, market watchers will be keen to see how this deal influences Conrad’s valuation and operational timeline.
Bottom Line?
Conrad’s Mako Gas Field deal with PLN EPI sets the stage for production and positions the company at the heart of Indonesia’s energy transition.
Questions in the middle?
- How will the confidential terms of the GSA impact Conrad’s future cash flow and profitability?
- What are the timelines and potential partners for the pending farm-out and final investment decision?
- How might Indonesia’s evolving energy policies affect Conrad’s broader portfolio beyond Mako?