“Companies in East Java started using the gas supply from Santos on Sunday,” PGN said in a press release.

Under the contract, Santos has agreed to sell 243 billion cubic feet of gas to PGN for eight to 12 years from the $75 million development.

PGN president director Washington Simandjuntak said the new gas supply was expected to reduce East Java’s diesel fuel consumption by around 6.75 million kilolitres.

The contract is also expected to normalise gas supply in East Java, where declining gas supply had previously forced PGN to cut delivery to buyers.

Under the agreement, gas will be supplied at a plateau rate of 110 million cubic feet per day. Plateau production is expected to last for five to six years.

The field is estimated to contain 240bcf of 2P reserves which will be produced over a field life of 8 to 12 years, according to Santos.

Gas from the Maleo field is being produced from a mobile offshore production unit (MOPU) supported by a new six well wellhead platform which is connected to a 7.4 kilometre spur-line to the East Java Gas Pipeline for distribution to the Surabaya and Gresik gas grid.

The MOPU is a converted jack-up drilling rig which was modernised and upgraded in Dubai into a standalone, relocatable gas production facility. It is being leased under a multi-year service agreement with Radiant Utama Interinsco (Indonesia) working with Global Process Systems Inc (Dubai).

Using a modified jack-up rig enabled Santos to achieve first gas only 16 months after final

investment approval.

The Maleo gas field, discovered in June 2002, is in the Madura offshore production sharing contract, 140km east of Surabaya.

Santos owns 75% of Maleo in partnership with state-owned Malaysian petroleum exploration and production company PC Madura, a subsidiary of Petronas (25%).

First production has been achieved on schedule, only four years from first discovery, and within the original budget estimate, Santos managing director John Ellice-Flint said.

Maleo is Santos' first offshore operated project outside Australia, he said.

"Maleo adds to Santos’ growing production, exploration and appraisal operations in Indonesia, and shows Santos is on track to continue to build Indonesia as a core area of business for the company," Ellice-Flint said.

“Delivering the project on schedule and within budget is an outstanding result especially given the cost pressures being faced by projects around the world."