BP Migas yet to decide on LNG discount

The Jakarta Post, Jakarta

The Oil and Gas Implementing Body (BP Migas) denied on Wednesday it was ready to cede up to a 40 percent discount to the Korea Gas Corp. (Kogas) in purchasing liquefied natural gas (LNG).

BP Migas head Rachmat Sudibyo said the body had yet to negotiate with the South Korean firm.

"Forty percent is a very huge discount. We will work to get a maximum price to ensure a profit for the state," he told reporters.

Various reports, including one that appeared earlier in this paper, quoted Rachmat as saying BP Migas might provide a discount of up to 40 percent to Kogas, if the firm agreed to extend its LNG purchase contract with Indonesia for another 20 years.

It has also been reported that Kogas has asked for a discount, which is deemed by the industry as a necessary strategy amid the tougher competition, particularly from new LNG producers such as Qatar and Australia.

Rachmat said Kogas and the Indonesian LNG marketing team had yet to meet to negotiate the contract extension and the new LNG price.

He said the price of LNG could range between US$4.50 to $4.60 per million British Thermal Units (MMBTU) against a crude oil price of $30 per barrel; the price could go up to $5 per MMBTU if the crude oil price reaches $36 a barrel.

Kogas' LNG purchase contract with the Arun LNG plant in Aceh province, under which the company buys 2.3 million tons per annum, will expire in 2007.

BP Migas has said Kogas was seeking to purchase between 500,000 tons and 1 million tons of LNG a year for a short-term period of 5 to 7 years when the existing contract expired.

South Korea is Indonesia's second largest LNG market, and LNG exports to the country comprised 19 percent of the total LNG exports of 27 million MMBTU per annum in 2002. Japan remains Indonesia's largest market, consuming 68 percent of total LNG exports, while the remaining 13 percent goes to Taiwan.