BP seeks loan from Bank of China, JBIC for Tangguh finance

Fitri Wulandari, The Jakarta Post, Jakarta

Energy giant BP PLc is seeking US$1.3 billion in loans from Chinese and Japanese lenders to finance the Tangguh gas project, a senior official said on Wednesday.

Rachmat Sudibyo, the head of the Oil and Gas Upstream Regulatory Board (BP Migas) said BP PLC was seeking loans from the Bank of China and Japan Bank for International Cooperation (JBIC) for the construction of Indonesia's third liquefied natural gas (LNG) plant in the Bird's Head area of Papua province.

"The discussion with international lenders has been resumed after being delayed because Tangguh had not secured enough market in the past," Rachmat told The Jakarta Post.

A consortium consisting of Japan's JGC Corp., U.S. Kellog Brown & Root, and local company Pertafenikki Engineering won the tender to build the LNG plant with an estimated cost of $1.3 billion, which is expected to enter into full operation in 2007.

To date, Tangguh has secured a total of 7.4 million tons per annum of LNG, including contracts to supply 2.6 million tons per annum to China's Fujian province, 1.1 million tons per year to South Korean buyer (SK and Posco) and a preliminary contract to supply 3.7 million tons of LNG to U.S.-based Sempra Energy.

Rachmat said the discussion with JBIC was in the final stages, while discussion with the Bank of China was still in the preliminary stages.

"But the Bank of China has shown willingness to provide a loan for the project," Rachmat said.

BP Migas deputy head Kardaya Warnika, however, as quoted by Dow Jones said that the Bank of China is expected to provide some $1 billion for the project.

Jacob Kastanja, BP's Tangguh communications manager confirmed that "the company is talking with the Bank of China and also continuing its discussion with other potential lenders".

However, he declined to provide further details of the discussion.

"Our financing arrangements are confidential. While we are happy with the progress being made, we do not wish to engage in speculation as to the outcome of our discussion or the timing of a final decision," Jacob said in his E-mailed reply to the Post.

At present, Indonesia has two LNG plants namely Bontang in East Kalimantan and Arun in Aceh province, which have a combined capacity of 31.6 million tons per year.

Indonesia's natural gas reserves, both potential and probable, stand at 178 trillion cubic feet (TCF).

The Tangguh project will provide significant revenue for Indonesia, particularly Papua, one of the poorest regions in the country. Under the contract, the central government will receive 70 percent of Tangguh's before-tax revenue, while Papua will receive 70 percent of the central government's revenue share.