LNG deal with China<\/p>\n
The development of 14.4 trillion cubic feet of proven natural
\ngas reserves near Bintuni Bay on the northwestern part of Papua
\nwas secured after state oil company Pertamina signed in Jakarta
\nlast week a firm 25-year contract to supply China National
\nOffshore Oil Corporation (CNOOC) with 2.6 million metric tons of
\nliquefied natural gas (LNG) a year starting in 2007.<\/p>\n
The S$8.5 billion deal capped more than two years of high-
\npowered political lobbying, including by President Megawati
\nSoekarnoputri herself who visited China in April, and concerted
\nmarketing efforts by British oil giant BP Plc and Pertamina.<\/p>\n
The contract is really a confidence-building feat after an
\ninitial disappointment of losing to Australia LNG Pty. Ltd in a
\nprevious bid for LNG supply, also to CNOOC but for China's
\nsouthern province of Guangdong, in August.<\/p>\n
Getting a buyer is the key to the development of a natural gas
\nliquefaction complex because, different from crude oil, natural
\ngas cannot be stored. Once it is produced it must immediately be
\ndelivered to buyers. Neither does LNG have a spot market.<\/p>\n
No wonder negotiations always involve complex calculations of
\nfinancing package and long-term pricing formula, followed by huge
\nconstruction works for the liquefaction plant itself and its
\nloading terminal by the supplier and unloading (receiving)
\nterminal by the buyer and orders for special cryogenic tankers to
\ntransport the fuel.<\/p>\n
CNOOC's commitment to tie up its huge LNG terminal in eastern
\nChina province of Fujian to the $2 billion Tangguh LNG project in
\nBintuni was apparently prompted by Indonesia's proven track
\nrecord not only as the world's largest LNG supplier with an
\nannual capacity of more than 30 million tons.<\/p>\n
Since 1997, the country has been well known as the most
\nreliable exporter of the clean-burning fuel as proven by the
\nimpeccable safety records of its LNG complexes at Arun in the
\nnorthern part of Sumatra and Bontang in East Kalimantan. Security
\nproblems did disrupt production at the Arun plant between March
\nand July last year, but Pertamina succeeded in meeting delivery
\nschedules to Japanese and Korean buyers with shipments from the
\nBontang plant.<\/p>\n
The Fujian contract alone is not adequate to provide economies
\nof scale to the Tangguh LNG project, initially designed with two
\ntrains with total production capacity of seven million tons a
\nyear. But as with the development of a completely new airplane,
\nthe deal can serve as the launch order for the LNG project.<\/p>\n
Getting other buyers will not likely be so difficult once the
\nproject comes on stream because Asia's demand for LNG, which has
\nincreasingly become a more important source of energy in the
\nregion, is projected to more than double to 100 million tons a
\nyear by 2010. In addition to China, demands in energy-hungry
\nJapan, South Korea and Taiwan have steadily been expanding. The
\nPhilippines, Thailand and India are other potential big buyers as
\nwell.<\/p>\n
The Tangguh project will certainly accelerate the development
\nof Papua, becoming a growth center for the least-developed
\nprovince, and will bring in huge additional incomes as 70 percent
\nof the revenue from the project will go to the central government
\nand 30 percent will directly stream into the local
\nadministration's coffers.<\/p>\n
Most important, though, is the multiplier effect of such a
\nhuge project in the remote area as it will also require the
\nbuilding of various basic infrastructure. The BP Plc consortium,
\nwhich will construct and operate the facility, has estimated that
\nat least 3,000 workers will be needed during the construction
\nphase, and 1,000 will be permanently employed in the plant's
\noperations.<\/p>\n
Yet more encouraging is the BP Plc's awareness that it must
\nfrom the outset fully embrace corporate social responsibility.
\nThe British oil giant seems seriously committed to avoiding the
\nfatal mistakes of other major oil mining firms during the
\nauthoritarian Soeharto era when the interests of local
\nstakeholders and the environment were often sacrificed for the
\nsake of high efficiency and high profits.<\/p>\n
BP Plc's hiring of scores of anthropologists, sociologists and
\nenvironmental consultants to work in Bintuni and its surrounding
\nareas long before the project construction starts is the first,
\nright step to realize its full commitment to preserving the
\nenvironment and social harmony with local tribes.<\/p>\n
A high standard of corporate social responsibility requires BP
\nPlc to be fully environmentally friendly so as not to damage the
\nlocal biodiversity and mangrove forests. Such responsibility also
\nobliges BP Plc to hire as many locals as possible and to procure
\nas much as possible its daily needs and those of its employees
\nfrom local suppliers. Simply put, BP Plc cannot operate as an
\naffluent enclave in the area.<\/p>\n
Professing high social responsibility is not an easy job and
\ncould even appear to be grossly inefficient, especially in such
\nan underdeveloped province as Papua, because that requires BP Plc
\nto invest a great deal in personnel training, education and in
\nthe development of local entrepreneurship.<\/p>\n
However, social harmony and full rapport with the local people
\nwill be the best security for BP's long-term operations in Papua.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/lng-deal-with-china-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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