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)