BP Migas inks initial deal with Sempra Energy

The Jakarta Post, Jakarta

The Upstream Oil and Gas Authority, BP Migas, has signed an initial agreement with U.S. Sempra Energy to supply up to 10 million metric tons of liquefied natural gas per annum, in a bid to tap the lucrative U.S. market, a senior official said on Tuesday.

The head of BP Migas, Rachmat Sudibyo, said that under the plan, Indonesia will supply between 6 million and 10 million tons of LNG per year to Sempra, starting from 2007.

"The agreement was signed on Aug. 28 in San Diego," he told reporters on the sidelines of the Asia Pacific Oil and Gas Conference and Exhibition.

Sempra -- a member of the consortium planning to build a LNG terminal in Baja (on the border between Mexico and California) -- will sell the gas to Mexico and to the U.S. West Coast, Rachmat said.

When asked about the source of the natural gas, Rachmat said supplies will come from Bontang field in East Kalimantan and Tangguh field in the far-flung province of Papua.

Another possible LNG source for the U.S. market is Donggi field in Central Sulawesi, which is currently being developed by state-owned oil and gas firm Pertamina, he added.

The deal with Sempra will open up more opportunities for Indonesia to enter the U.S. LNG market.

Earlier, Pertamina signed a similar agreement with Marathon Oil Corp. (MRO), which is also eying the gas market in Mexico.

The gas resources for Marathon will be taken from Matindok and Senoro-Toili blocks in the Donggi gas field project. Matindok is fully-operated by Pertamina while the Senoro-Toili block is jointly operated by Pertamina and Exspan, a subsidiary of local oil and gas company PT Medco Energi International.

Indonesia is struggling to maintain its position as one of the largest LNG producers in the world amid the increasingly competitive LNG market of the Asia Pacific region.

While the number of buyers remains flat, the market is now crowded with producers, including Malaysia and Australia.

The government and the private sector have been working hard to seek ways to enter the U.S. market. Natural gas demand in the U.S. is surging as the it faces a steady decline in supply.

Indonesia will face tough competition as Australia is also eying the U.S. West Coast market.

"We are now intensifying efforts to sell LNG because Indonesia has the ability to supply gas from a number of resources," Rachmat said.