BP sees no need for extra LNG trains

Fitri Wulandari, The Jakarta Post, Jakarta

BP Indonesia, a unit of Anglo-American energy giant BP Plc., said it does not have any plans to build additional liquefied natural gas (LNG) trains although it had secured LNG supply contracts that were larger than planned capacity.

"We would carefully consider any plan to build additional an facility. But at the moment we are sticking to our plan of building two LNG trains," Jacob Kastanja, BP's Tangguh communications unit manager told The Jakarta Post over the weekend.

BP is planning to build two LNG trains with a total capacity of seven million tons per year at its Tangguh gas field in Papua province.

Last week, the company signed a 20-year preliminary contract with U.S.-based Sempra Energy, under which it would supply some 3.7 million tons of LNG per year to the latter company starting 2007. This boosts BP's LNG supply contract to date to 7.4 million tons pear annum. The company previously won a 2.6 million ton per annum contract from China's Fujian Province, and another 1.1 million tons per year (not 1.5 million tons as earlier reported by this paper) from South Korean buyers: SK and Posco.

Jacob said BP would maximize the two planned LNG trains, but fell short of providing details on how to maximize the facilities.

LNG is natural gas which is cooled to turn it into liquid form for transportation using tanker ships. The gas then is regasified and distributed through pipelines.

But Jacob added that in the future BP could expand the plant capacity based on customer demand.

"Any plans for expansion will be based on customer needs," he said.

Jacob said the company is preparing the construction of the Tangguh LNG facility, which will start next year. This will be Indonesia's third LNG plant.

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

Indonesia already 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.

Jacob said that securing the U.S. contract had given confidence to the Tangguh consortium after the project had been in limbo for some time as it had only received a small number of orders. Creditors have been reluctant to provide funds for the project because of the slow progress being made, analysts have said.

Securing the contract also confirms Indonesia as one of the world's top LNG producers. Entering the U.S. market, the largest energy consumer in the world, will boost Indonesia's profile. The U.S. Energy Information Administration forecasts U.S. imports of LNG will grow to 4.8 trillion cubic feet in 2025, which is much higher than the estimated 540 billion cubic feet in 2003.

This will provide significant revenue for the government. Under the contract with Sempra Energy, for instance, the government would bag a total of $10 billion in revenue. Under the production sharing contract, the central government will receive 70 percent of Tangguh's after-tax revenue and Papua province will receive 70 percent of the central government's revenue share.