BP to sign LNG supply contract with U.S. firm

BP to sign LNG supply contract with U.S. firm

The Jakarta Post, Jakarta

Anglo-American energy giant BP Plc. is expected to sign an
agreement next week to sell some 3 million tons per year of
liquefied natural gas (LNG) to U.S.-based Sempra Energy,
according to Minister of Energy and Mineral Resources Purnomo
Yusgiantoro.

The minister said that the LNG would come from BP's Tangguh
gas field project in Papua province.

"The plan is to sign the heads of agreement (HOA) sometime in
the middle of December in the U.S. The signing ceremony will be
witnessed by the U.S. mining minister and me," Purnomo said on
Tuesday.

If realized, the deal with Sempra will give a significant
boost to BP's Tangguh project, which will have an installed
capacity of seven million tons of LNG per year. But thus far, the
project has only secured a contract to supply 2.6 million tons
per year to China's Fujian project, starting from 2007. An HOA
was also previously signed with South Korean buyers.

The government has been helping BP to seek buyers for Tangguh
LNG so that development of the project can begin next year as
scheduled.

The government has been in intense negotiations with Sempra
and another U.S. oil firm, Marathon Oil, to sell around 5 million
to 6 million tons of LNG per annum to Mexico and the U.S. west
coast, starting from 2008. Both companies are planning to
construct LNG-receiving terminals and facilities in Mexico.

The LNG to Mexico will be supplied from Tangguh, Bontang LNG
facility, East Kalimantan, and possibly from state oil and gas
firm PT Pertamina's Donggi gas field, Central Sulawesi.

Purnomo also said earlier that he planned to hold talks with
Japanese buyers on a possible extension of current contracts to
supply some 12 million tons of LNG per year. The contracts will
expire by 2010.

Reports have said that the government may consider a request
from Japanese buyers to lower the selling price of Indonesia's
LNG, given strong competition from other countries.

Elsewhere, Purnomo also said that the government had also been
trying to sell more LNG to China, particularly to Jiang Shu and
Shantung provinces, where demand for the commodity is quite high.

The Tangguh LNG project will become the country's third LNG
plant after Bontang and Arun, Aceh. The last two facilities have
a combined installed capacity of 31.6 million tons per year.

Aside from boosting Indonesia's LNG output, the project will
also generate revenue for Papua, one of the poorest regions of
the country.