Govt to establish team for Tangguh LNG project
Govt to establish team for Tangguh LNG project
Fitri Wulandari, Jakarta
The government is establishing a team to set up policies
related to the Tangguh liquefied natural gas (LNG) plant being
developed in Papua.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the establishment of the team will set up guidelines to
solve any issues that may arise once the country's third LNG
plant comes on stream in the future.
"This is a huge project and it requires an integrated policy,"
Purnomo told reporters on Tuesday, adding that his office would
soon issue a decree on the establishment of the team.
Headed by an official from the Oil and Gas Implementing Body
(BP Migas), the team will consist of officials from the energy
ministry, the finance ministry, the office of Coordinating
Minister for the Economy and state oil and gas firm PT Pertamina.
The LNG project is being built by a consortium led by British
energy giant BP PLC.
The team will be tasked with setting up a strategy to solve
problems related to securing supply to Tangguh's buyers, among
other responsibilities.
"Once the Tangguh plant becomes operational, we should already
have a clear policy on how to solve problems like the one that
hit the Arun plant," Purnomo said.
The Arun plant recently faced difficulties meeting its
commitment to buyers due to a shortage of gas supplies from
American firm ExxonMobil. In the past, ExxonMobil supplied its
gas to the plant and local fertilizer firms. It could not,
however, continue to supply both because of a decline in its
natural gas source.
In order to resolve the situation, the government bought LNG
from other producers to meet Arun's obligation to foreign buyers
and asked ExxonMobil to supply its gas to local fertilizer firms.
Another aspect that will be studied by the joint team concerns
the distribution of the Tangguh plant's revenue between the
government and the consortium that owns the project.
Purnomo said the government would like part of the revenue
from the outset of the LNG plant's operation, rather than after
the consortium paid all their costs.
Under the current production sharing contract (PSC), a
contractor retains its revenue to repay investment costs and will
share its revenue with the government after repayment.
In the case of the Tangguh plant, the government will receive
some revenue from the plant only after the consortium reimburses
all their expenses, including bank loans, for the development of
the project.
Under a standard PSC, the government receives about 70 percent
of the contractors' gas revenue.
"Tangguh has a huge investment of US$2.5 billion. We
understand that investors have put a lot of money in it. But if
we have to wait (until they repay all their investment costs),
the government won't get anything," he said.
Located in Bintuni Bay, the Tangguh plant will draw from gas
fields with proven reserves of 14.4 trillion cubic feet (TCF).
The plant is designed to have two trains with a combined
production capacity of 7 million tons in its initial production.
The Tangguh consortium has secured deals to supply 3.15
million tons of LNG per annum to China's Fujian province and
South Korean steel maker Posco.
It expects to clinch deals to supply another 600,000 tons to
South Korean power company K Power and 3.7 million tons to U.S.
energy company Sempra Energy.