BP to sign $1.43n LNG deal with Posco

BP to sign $1.43n LNG deal with Posco

Bloomberg, Seoul

BP Plc., Europe's largest oil company, will sign a US$1.43
billion contract on Wednesday to supply 11 million metric tons of
liquefied natural gas to Posco, South Korea's largest steelmaker,
over 20 years starting in 2005.

BP and its partners in Indonesia's $2.2 billion Tangguh
project will sign a final sales agreement with Posco officials on
the Indonesian island of Bali, Kim Soo Jung, a spokeswoman for
the steelmaker, said in a telephone interview in Seoul.

In August last year, BP and BP Migas, Indonesia's oil and gas
regulator, signed a preliminary agreement to supply 550,000 tons
a year of the fuel to Posco. They also signed a preliminary
contract to supply 600,000 tons a year to SK Corp., South Korea's
largest oil refiner, over 20 years from 2006. SK has the right to
buy an extra 200,000 tons of LNG each year until 2010.

LNG imports by Posco and SK Corp. for their own use will end
state-run Korea Gas Corp.'s monopoly on supplies of the fuel in
Korea. The government is pushing ahead with a plan to reorganize
the gas industry to allow other companies to import and sell the
fuel in the domestic market.

Indonesia, the world's biggest LNG exporter, agreed to sell
the fuel to Posco and SK Corp. at a higher price than to China,
Djoko Harsono, head of marketing at BP Migas, said last month in
Jakarta.

"I can't say we are paying less than China does," said
Park Sung Eun, an official at Posco's LNG project team. He
declined to elaborate.

Indonesia had agreed to sell 2.6 million tons a year of LNG
to China's Fujian province for about $2.40 per million British
thermal units based on a formula linked to oil prices, said
Rachmat Sudibyo, head of the regulatory agency, in October 2002.
He put the worth of the contract with Posco at $1.43 billion last
year.

Indonesia wants PT Badak NGL in Bontang, the world's biggest
LNG plant, to supply Korean buyers the fuel initially because gas
won't start flowing from Tangguh until 2007.

Posco is spending $290 million to build a terminal in Korea
able to return about 1.7 million tons a year of LNG to gas form.
Posco plans to share the terminal that's scheduled for completion
in March 2005 with SK Corp., which will buy the fuel through its
unit SK Power Co.

LNG is natural gas that has been chilled into liquid form so
that it can be transported on a ship. Buyers turn LNG back into
gas so it can be piped to power plants and households.