BP expects to seal $3.5b in loans for Tangguh plant next year
Urip Hudiono, The Jakarta Post/Jakarta
A BP Plc.-led consortium is expecting to secure by next year US$3.5 billion in loans from international lenders for the completion of its Tangguh liquefied natural gas (LNG) plant in Papua, a company official says.
"We are currently working intensively with lenders on the loan," BP's executive vice president for the Tangguh development, Budiman Parhusip, said on Friday.
"We expect to reach financing closure as we go through the start of 2006."
Prospective creditors, Budiman said, include a consortium of Chinese banks led by the Industrial Commercial Bank of China (ICBC), the Japan Bank for International Development (JBIC), the Asian Development Bank (ADB), and other international commercial banks.
He further explained that the consortium is at present negotiating the exact amount, terms and conditions of the loan with each lender, hoping to seal agreements with them one by one in tranches going through 2006.
Budiman also said that should there be a delay in the signing of the loan agreements, it would not affect the project's completion date, as the consortium was prepared to support its financing.
"It has been agreed that should the loans be delayed, participating contractors will ensure interim funding, so that the project will progress as planned," he said.
British energy giant BP owns 37.16 percent of the Tangguh project, making it the project's largest shareholder, with Chinese oil and gas company CNOOC Ltd. in second with a 16.96 percent stake. Other investors include Japanese firms MI Berau B.V., Nippon Oil Exploration (Berau) Ltd., KG Berau/KG Wiriagar, and LNG Japan Corporation.
The Tangguh LNG plant, which draws its supply from six fields with proven reserves of 14.4 trillion cubic feet in the Bintuni Bay area of Papua, is planned to have a production capacity of 7.6 million metric tons a year from its two production trains, with commercial output set to begin in late 2008.
Work on the plant had commenced since March, and is now 17 percent completed, with 2,300 employees working there as of November.
The plant is expected to reestablish Indonesia's LNG export capability, amid the country's recent struggle to fulfill orders to Japan, South Korea and Taiwan, due to declining output from its LNG plants in Bontang and Arun.
BP and its partners have signed contracts to supply 2.6 million tons of LNG a year from Tangguh to Fujian, China, 1.15 million tons a year to South Korean steel firm POSCO and energy firm K-Power, and 3.7 million tons a year to Mexican energy firm Sempra Energy LNG Corp.
Concerning the recent situation of higher oil and LNG prices that could affect the value of the Fujian contract, BP Indonesia executive vice president, Nico Kanter, said talks over the deal's exact terms and conditions were ongoing. The 25-year Fujian contract was signed in 2002 and is worth $8.5 billion.