BP expects LNG project to begin 2nd quarter 2002

BP expects LNG project to begin 2nd quarter 2002

JAKARTA (JP): British-American oil and gas company Beyond
Petroleum (BP), formerly British Petroleum, expects the
construction of the Tangguh liquefied natural gas (LNG) project
in Irian Jaya to start in the second quarter of next year, a
company official said on Tuesday.

"We're talking possible construction sometime in spring next
year," BP senior vice president for external affairs John
O'Reilly told reporters on the sidelines of a seminar on the
impact of regional autonomy on the energy sector.

BP, along with its partners, plans to export LNG from the
planned LNG center, which is located in Berau Bay.

Gas supplies for Tangguh will come from nearby gas fields in
Wiriagar, Berau, and the Muturi areas which have proven gas
reserves of 14.4 trillion cubic feet (tcf).

O'Reilly said BP would start construction of the Tangguh LNG
center after completing an environmental assessment of the
project.

BP started the environmental study last year to assess the
impact of the project on the surrounding communities and
environment.

"It (the study) is a consultative process, and the terms of
reference are being decided by the (government's) Amdal
(Environmental Impact Analysis) commission," O'Reilly explained.

According to Pertamina, the Amdal for Tangguh is the first in
the country's oil and gas industry to include consultation with
the local community.

Under this process, Pertamina informs locals of the outline of
the construction and the impact of the project on the surrounding
areas.

Locals are then invited to consult and provide Pertamina with
input before construction of the project begins.

"The pace of the project will depend on when we get the
approval of the environment agency," O'Reilly said in reference
to the Environmental Impact Management Agency (Bapedal).

Another key factor is finding a long-term buyer for Tangguh's
LNG to secure the project's return on investment.

Pertamina and BP initially planned to start Tangguh's
construction this year.

But the absence of a long-term buyer forced them to revise the
schedule.

However, O'Reilly said that BP remained upbeat on its original
target to start Tangguh's LNG production by the year 2006.

"No change on that, so that's an ambitious schedule. With good
fortune and market, we believe we can start production in 2006,"
he said.

He said that among the most potential buyers of Tangguh's LNG
was China.

Pertamina has said that the company and BP sought to supply
power plants in China with three million tons of LNG.

"BP has won the part of the contract to build the Guangdong
LNG terminal," O'Reilly said.

He said the Chinese government would then proceed with the
tender of the LNG supply, in which BP and Pertamina could
participate.

O'Reilly declined to mention the time frame for the tender
process, or when BP expected the Chinese government to announce
the winner.

Aside from China, the two companies are also seeking to
increase Indonesian LNG exports to Taiwan.

After Japan, Taiwan is the second largest buyer of Indonesian
LNG, with imports of over three million tons per year.

Pertamina said that the planned LNG supplies would be for
Taiwan's Tatan Power Plant, which would be developed by Taipower
in the northern part of Taiwan.

But Pertamina is still undecided whether to supply Taiwan with
LNG from Tangguh, or from the Bontang NGL Co plant in East
Kalimantan.

According to Pertamina president Baihaki Hakim, LNG from
Tangguh may be less competitive, because construction of the
plant had not begun yet, which raises the cost of selling the
LNG.

Pertamina further said that a surge of new gas suppliers
across the globe had made competition tougher.

Among Indonesia's new competitors is Qatar, which is also
eyeing the supply of LNG to Taiwan and India.

The growing supply of LNG has further increased buyers'
leverage so that they can demand better contract terms, such as
shorter LNG contracts or the freedom to buy small quantities.

In response to the difficult market conditions, Pertamina said
it might start the Tangguh project even though the company could
only secure a short-term contract enough for the development of
one LNG train. (bkm)