BP, CNOOC hire 7 lenders for a $1.3b Tangguh loan

BP, CNOOC hire 7 lenders for a $1.3b Tangguh loan

Denise Kee, Bloomberg/Singapore

BP Plc and CNOOC Ltd. have hired seven banks to help arrange a
S$1.3 billion loan to develop the Tangguh liquefied natural gas
project in easternIndonesia, a banker involved in selecting the
lenders said.

The seven banks, Bank of Tokyo-Mitsubishi, BNP Paribas SA,
Fortis Bank SA/NV, ING Groep NV, Mizuho Corporate Bank, Standard
Chartered Plc and Sumitomo Mitsui Banking Corp., will be informed
today of the mandate, which is decided by the state oil regulator
BP Migas, BP and CNOOC, the banker said. The 7 1/2- year loan,
which will be signed January, is part of S$3.5 billion in
financing for the project, which will cost about $$6.5 billion.

The Tangguh LNG plant, the biggest such project in Asia, will
help Indonesia, the world's largest LNG seller, to meet its
export commitments as its reserves in the fields in Aceh
province, operated by Exxon Mobil Corp., are depleting. Indonesia
supplies countries including Japan, Taiwan and South Korea with
about 25 million tons a year of LNG.

In an effort to stem the output decline, the country may allow
foreign energy companies to explore in remote areas for the first
time, using proceeds from their oil- and gas-producing units
elsewhere in Indonesia, Kardaya Warnika, chairman of the state
oil regulator BPMigas, said yesterday. This follows a move in
June to scrap taxes on equipment imported for exploration, part
of the government's initiative to lure energy investors.

"Most of the LNG-related financing will likely be for projects
in Indonesia and Papua New Guinea," said Joris Dierckx, Head of
Export and Project Finance Asia of Fortis Bank. "These countries
have lots of gas reserves and they need money."

In addition to the Tangguh LNG plant, which is scheduled to
start production in 2008, CNOOC is planning to build a LNG plant
in Papua New Guinea to meet its rising demand for LNG, the
country's Petroleum and Energy Minister Moi Avei said on Dec. 5.
The project will revive a now-defunct BP Plc-led proposal for a
4.5 million-ton-a-year LNG plant. CNOOC in June forecast China's
demand for LNG imports may rise to 20 million tons a year by 2010
and as high as 60 million in 2020, as the country promotes the
use of cleaner-burning fuels.

LNG is natural gas that has been chilled into liquid form so
that it can be transported on a ship. Buyers turn LNG back into
gas so it can be piped to power plants and households.

The rest of the S$3.5 billion will come from the Asian
Development Bank, the Japan Bank for International Cooperation
and a group of Chinese lenders.

The loan will be divided into two portions. BP and CNOOC will
guarantee a portion each and have appointed Societe Generale SA
as their financial adviser.

The project will build two LNG trains with capacity to produce
7.6 million tons per year of LNG. The development will include
gas production facilities, a seaport and airfield.

BP owns 37.16 percent of the project, making it the biggest
investor. CNOOC is the second-largest, with 16.96 percent.

Other investors include Mitsubishi Ltd., Japan's largest
trading company, and Inpex Corp., Japan's biggest oil explorer.
They hold a combined 16.3 percent in Tangguh. A Nippon Oil Corp.-
led company has a 12.23 percent stake and LNG Japan, owned by
Sumitomo Corp. and Sojitz Holdings Corp., holds 7.2 percent.
Japan National Oil, Kanematsu Corp. and Mitsui & Co.'s Overseas
Petroleum Corp. unit hold a combined 10 percent.