Committee for LNG marketing planned

A'an Suryana, The Jakarta Post, Jakarta

The government is to set up a special committee to coordinate the marketing of the country's liquefied natural gas (LNG) overseas, a senior official said on Saturday.

The Director General of Oil and Gas at the Ministry of Energy and Mineral Resources, I'in Arifin Takhyan, said that without coordination efforts, LNG exporters here could be embroiled in unhealthy competition, which in turn could cause losses to the state.

"Our proposal (for the establishment of the committee) has been filed with the Ministry of Energy and Mineral Resources.

We hope that he (the Minister) will sign it within two or three weeks," I'in told The Jakarta Post.

The special committee will take over from state-owned oil and gas firm Pertamina, which for the past few decades has been handling the marketing of Indonesian LNG overseas. Pertamina lost its monopoly in 2001 following the approval of the new oil and gas law.

This law says that LNG producers can directly take charge of the marketing of their products overseas, in competition with Pertamina.

According to the proposal, the committee will be chaired by the minister of energy and mineral resources. The members will include the director general of oil and gas, chairman of the oil and gas implementing body (BP Migas), and the president of Pertamina.

Pertamina had initially wanted to be left in charge of LNG marketing following the failure of Indonesia to clinch an LNG supply contract from China's Guandong province. The contract was won by Australia.

The local unit of Anglo-American energy giant BP Indonesia was appointed by the government to lobby the Chinese authorities to secure the LNG supply contract. This was the first time a private company was assigned to undertake overseas marketing for the country's LNG. The LNG was supposed to come from BP's Tangguh LNG project in Papua province.

The failure to win the Guangdong contract disappointed many parties at home, including Pertamina, although BP won a smaller contract from China's Fujian province.

Pertamina insisted that with 25 years experience in marketing LNG overseas (turning Indonesia into one of the major LNG players in the world), the government should restore marketing responsibilities to the state firm.

The oil and gas company claimed that with a couple of giant LNG projects here, Pertamina would be able to ensure security of supply to would-be buyers, thus giving it a better chance of winning overseas contracts.

Pertamina controls the Arun LNG plant in Aceh, and the Bontang LNG plant in East Kalimantan.

"If there is damage in one LNG plant, Pertamina can request other LNG plants in the country to cover its obligations," Ridwan Nyak Baik, a spokesman for Pertamina, told the Post.

Ridwan said that as new overseas players had been entering the global LNG market, coordination was crucial to help win supply contracts on the overseas market.

But the government turned down the Pertamina proposal, deeming it more beneficial to set up a special committee.

"By including BP Migas in the joint committee, the interests of the contractors will be accommodated," I'in said.