BP signs natural gas deal with Sempra

The Jakarta Post, Jakarta

Anglo-American energy giant BP Plc has signed a sales and purchase agreement with U.S.-based Sempra Energy LNG Corp. to supply up to 3.7 million tons per year of liquefied natural gas (LNG) to Mexico from the Tangguh field in the province of Papua, Indonesia.

BP, which signed the 20-year contract as a partner of Indonesian oil and gas regulator agency BPMigas in the Tangguh LNG project, will start supplying LNG in 2008 to Sempra's proposed LNG import and re-gasification facilities in Baja California, Mexico.

"Working in collaboration with BP, the agreement represents the first long-term LNG supply from Indonesia to the North American market," BPMigas said in a statement on Monday.

The signing is a significant step forward for the Tangguh LNG project, as it will mean that the project has enough sales commitments to start the plant construction, which is slated to be completed in 2008.

The project is now seeking financing from a consortium of foreign banks, estimated to cost about US$5 billion, of which BP and partners will cover $2 billion with the remaining $3 billion expected to come from lenders.

The contract with Sempra is the fourth for the Tangguh project. BP has previously signed deals with South Korea's steel maker POSCO and power firm K Power, and China's Fujian province to supply LNG starting 2005 and 2007, respectively. BP is seeking supply from other producers to meet the export commitments while its plant is under construction.

Indonesia has been struggling to maintain its position as a top LNG producer in the increasingly competitive market. Last year, Indonesia exported 26.5 million tons of LNG to Japan, South Korea, and Taiwan.

Indonesia has already two LNG plants, located in Arun, Aceh and in Bontang, East Kalimantan.

Located in Berau-Bintuni region in Papua province, the Tangguh LNG plant is expected to produce 8 million tons per annum in the first phase of production. Gas fields that will feed the plant have certified reserves of 14.4 trillion cubic feet (TCF).

BP holds a 37.16 percent stake in the project in partnership with MI Berau BV (16.30 percent), CNOOC Ltd (16.96 percent), Nippon Oil Exploration Berau (12.23 percent), KG Companies (10.0 percent) and LNG Japan Corporation (7.35 percent).