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.