Tue, 30 May 2000

Energy minister off to China to sell Tangguh gas

JAKARTA (JP): Minister of Mines and Energy Susilo Bambang Yudhoyono will visit China in a bid to find buyers for the Tangguh natural liquefied gas (LNG) project in Irian Jaya, a senior government official said on Monday.

Director general for oil and gas at the Ministry of Mines and Energy Rachmat Sudibyo said that the minister planned to visit China in July or by late June at the earliest.

He said the minister would first attend a meeting of the Organization of Petroleum Exporting Countries (OPEC) on June 21, before heading to China.

Because of China's closed market, he explained, a visit by the minister was important to tap the country's gas market.

"It will be a government to government approach" he told The Jakarta Post.

China's gas demand is estimated to reach four to five million tons per year, according to state oil and gas company Pertamina.

Rachmat said that China would buy from Pertamina at least three million tons of gas, which made up the production capacity of one LNG processing plant, called a train.

Pertamina, and its American production sharing contractor Arco Richfield Company (Arco), expect to start construction on the Tangguh plant next year, although no contract is in sight so far.

It hoped to sign the contracts by the end of this year.

However, aside from Indonesia, Australia is also set to penetrate China's market.

"Competition is getting tougher" Rachmat said.

But he said Indonesia had a good chance to compete against Australia, given that it has been a reliable gas supplier to other Asian countries such as Japan.

Furthermore, he said, Australia's transportation costs would be higher than that of Indonesia.

He added that Malaysia might also supply gas to China, but in limited sales due to lower gas reserves.

Rachmat said that representatives from India planned to visit Indonesia next month to discuss the possibility of Pertamina supplying its gas demands.

He said their gas demands would also reach about three million tons per year.

"But in India we're facing tight competition from Qatar," Rachmat said.

According to him, Qatar's proximity to India and its huge gas reserves made the country a potential supplier to India.

He said that due to the huge gas reserves, Qatar was able to sell its gas at a lower price.

Pertamina also said that it was pushing to find buyers lest they were unable to start construction by 2001.

Head of the planning and development division at Pertamina's processing directorate Maskurun said that a joint marketing team with Arco were working on marketing Tangguh's gas.

"We're doing our best to find buyers," Maskurun said in a press meeting to launch the project's environmental impact assessment (Amdal).

Maskurun said that aside from trying to tap new markets such as China and India, Pertamina would also market Tangguh's gas to its traditional markets in Japan, Korea and Taiwan.

He said that should no contract be signed this year, Pertamina would have to delay the construction of the LNG plant, which it expected to start operating in 2005.

The Tangguh project located in Berau Bay has a proven reserve of 14.4 trillion cubic feet (tcf).

It will have an initial production capacity of two trains or equivalent to six million tons of gas per year, which the Wiriagar, Berau and Muturi areas will supply.

Pertamina, Arco and its partners will invest some US$1.5 billion in the development of the two trains.

Meanwhile, deputy at the Environmental Assessment Agency (Bapedal) Effendi Sumardja said the government was inviting the public's participation on the Amdal process of the Tangguh project.

He encouraged the public to provide input to the government or Pertamina during the Amdal process, which he expected to be completed by next year.(bkm)