The construction of the US$1 billion liquefied natural gas (LNG) plant in Senoro, Central Sulawesi, may be hampered by prolonged gas price re-negotiations between the operator and gas suppliers, and official said on the weekend.
The already lengthy negotiation process has forced Upstream Oil and Gas Regulator BPMigas to extend discussion deadlines by a month, to the end of March, said deputy chairman for financing and marketing, Eddie Purwanto.
No construction would be made before the completion of negotiations.
"The discussion has progressed in a good direction, but is not finalized yet," Eddie said.
"We will give them more time to conclude the deals.
"The chance for a delay is there, but we hope they can finalize this as soon as possible."
The gas suppliers are state oil and gas firm PT Pertamina and PT Medco Energi Internasional and the buyer is Mitsubishi Corp., which controls the plant -- the fourth LNG plant to be built in Indonesia after Arun in Aceh, Bontang in Kalimantan and Tangguh in Papua.
The suppliers said the gas price previously set under a contract at $3.85 per million British thermal unit (mmbtu) was no longer realistic. Pertamina said the price was too low compared to current prices globally which stand between $8 and $9 per mmbtu.
The project would have a total capacity of 2 million tons of LNG and construction was supposed to start during the first quarter of the year.
The plant is targeted to come on stream in the second quarter of 2011.
The Senoro LNG plant will be built based on an integrated upstream and downstream business scheme, under which Pertamina and Medco will supply gas from their block operations.
Pertamina and Medco have a participating interest in the field of 29 percent and 20 percent, respectively, with Mitsubishi controlling the remaining 51 percent.
The gas supply is expected to come from two blocks -- Senoro-Toili block, which is jointly owned by Pertamina and Medco, and Donggi block, which is wholly owned by Pertamina.