BP to lead Indonesia's LNG marketing efforts in China

BP to lead Indonesia's LNG marketing efforts in China

JAKARTA (JP): The government and state oil and gas company
Pertamina have agreed to appoint Anglo-American energy firm BP
Plc to lead marketing efforts in China for its Tangguh liquefied
natural gas (LNG) project in Irian Jaya, a BP senior official
said Tuesday.

BP Indonesia's vice president for government and public
affairs Satya W. Yudha said the appointment of BP for marketing
aimed to smooth the way for the Tangguh LNG project to win the
impending tender for the contract to supply LNG to China.

Pertamina, which has thus far led marketing efforts, would
still be involved in marketing, but it would take a backseat
position in order to support BP, Satya said.

He said the government, Pertamina and BP believed that with BP
taking the leading role in marketing efforts, the opportunity for
the Tangguh LNG project to win the tender would be greater given
the fact that BP had been involved in the development of the LNG
receiving terminal in China.

"BP will become the shield on the front. As a matter of fact,
this is what the Chinese party prefers," Satya said, following a
meeting between BP Indonesia, Pertamina officials and Minister of
Energy and Mineral Resources Purnomo Yusgiantoro and director
general of oil and gas Rachmat Sudibyo.

Pertamina was represented by downstream director Muchsin Bahar
in the meeting.

China is planning to hold an auction in early August to import
about 3 million tons of LNG annually to its southern province,
Guangdong. It will be the first time that the world's most
populous nation has imported LNG.

Indonesia is competing with other countries, including
Malaysia, Australia, Brunei, Qatar, Iran and Russia for the LNG
supply contract. Qatar is considered the main competitor, where
American energy giant ExxonMobil has built an LNG plant.

BP has been selected as the partner for Chinese state oil and
gas company China National Oil Overseas Corporation (CNOOC) to
build the LNG receiving terminal in Guangdong.

This, analysts say, put BP in a better position to win the LNG
supply contract.

BP is the 50 percent owner of gas reserves in Muturi,
Wiriagar, Birau in Irian Jaya that will supply gas to the Tangguh
LNG plant. BP and its partners had discovered proven reserves of
14.4 trillion cubic feet of gas.

According to Widya, Indonesia will submit its bidding early in
August.

China will initially select two or three bidders in the first
phase of the auction and announce one winner at the end of
September, he said.

Satya also emphasized that the government and Pertamina had
agreed that LNG supplies to China would come from the Tangguh LNG
plant.

"BP, Pertamina and the government had been in unison that the
LNG will come from Tangguh," he said.

Some disagreements recently surfaced at the ministry and
Pertamina over the future source of LNG supplies to China as the
investors of the Bontang LNG plant in East Kalimantan -- led by
French oil and gas firm TotalFinaElf -- had also asked Pertamina
to market the LNG plant.

TotalFinaElf and its partners, including American firms Unocal
Indonesia and Vico Indonesia, have planned to build the ninth
train or Train I at the Bontang plant.

Some Pertamina and government officials have suggested the
government market the Train I project to China rather than the
Tangguh project because the LNG from the former would be cheaper
than from the Tangguh project.

Technically, LNG from Train I will be cheaper than if it is
produced by the Tangguh plant because the former would be an
expansion project, while Tangguh is a grassroots project.
Tangguh's investors need to spend a lot of investment for the
construction of infrastructure, while Train I's investors would
not need to spend any money to build infrastructure.

Pertamina and government officials, who favor Train I, argue
that Indonesia's chance to win the Chinese LNG supply contract
would be greater if it proposes to supply LNG from Train I.
(jsk/bkm)