Huge Asian market awaits Tangguh gas: BP Amoco

JAKARTA (JP): Oil and gas company BP Amoco Plc said on Tuesday growing gas consumption in the Asian region gave its Tangguh LNG gas project in Irian Jaya vast potential markets.

The head of energy analysis at BP Amoco, Andrew Barton, said that along with China's huge gas market, the Asian region led the world's liquefied natural gas (LNG) market, which grew by 7 percent to 8 percent last year.

"There is a tremendous potential for natural gas consumption in Asia, because it's such a small percentage of the overall energy mix (energy types in use)," Barton said following his presentation of a statistical review of the global energy industry.

The Tangguh LNG project, located in Berau Bay in Irian Jaya, is being jointly developed by BP Amoco and state oil and gas company Pertamina.

However, construction on the project awaits the signing of a contract, which Pertamina and BP Amoco expect to come from China by the end of this year.

Pertamina expects gas demand in China to reach four to five million tons per year.

But Barton said that aside from the Chinese market, Indonesia could sell its Tangguh gas to Taiwan, South Korea and India, as well to Japan, its traditional market.

According to him, improving economies in several Asian countries was boosting energy consumption, which in turn required more power plants to meet demand.

He said the current energy mix in Asia -- the energy types used to power electricity plants -- comprised mostly oil and coal.

"As economies grow they will tend to build power gas stations rather than coal," Barton said, adding as an example that 95 percent of new power plants in the United States use gas.

Gas, he said, was not only environmentally cleaner but also cheaper compared to other energy sources. "Gas is the cheapest way of generating power."

He said natural gas was Asia's fastest growing fuel, driven mostly by major infrastructure projects linking gas in the Middle East, Southeast Asia and Russia, with Asian urban centers.

In Japan, he said, the arrival of newly contracted gas from Qatar had stimulated gas use for power and industrial cogeneration power plants.

Whereas gas consumption in Korea and China, he said, had outstripped their 10-year average annual growth rates of 20 percent and 5 percent, respectively.

Barton attributed the growing gas demand in Korea to the increasing use of gas for power plants and household use.

He said that in China gas was increasingly used to replace coal for power generation in a bid to cut air pollution in urban centers.

He added that the completion of the gas separation project in Vung Tau, Vietnam, had caused gas consumption to grow rapidly from a low base.

He said that gas consumption in the world grew by at least 2.4 percent in 1999, as compared to the annual average of 1.8 percent growth over the last 10 years.

He cited Asia, South America and Europe as among the regions with the strongest consumption growths in 1999.

Barton said key changes in LNG trade throughout 1999 were the emergence of Trinidad and Nigeria as major exporters, the 70 percent increase in Qatar gas exports and the increase in gas exports from Indonesia and Malaysia, which showed 7.5 percent and 6 percent growth, respectively.

Meanwhile, BP Amoco senior external affairs officer John O'Reilly expressed optimism that Indonesia would be able to sell its Tangguh gas to China.

However, he stated Asia had numerous alternative markets for the sale of the Tangguh gas, saying BP Amoco and Pertamina also were considering seeking contracts with Korea, Japan and possibly India.

"But China is clearly a very attractive option," he said, adding that Minister of Mines and Energy Susilo Bambang Yudhoyono was currently in China seeking a gas contract.

O'Reilly further estimated the Tangguh gas project would bring in some US$60 billion over a period of about 30 years.

Pertamina expects construction of the project to begin by 2001, with its completion by 2005.

The project was first developed by Pertamina and oil and gas company Arco, before the latter's recent merger with BP Amoco.

The Tangguh project has a proven reserve of 14.4 trillion cubic feet. It will have an initial yearly production capacity of two trains, the equivalent of six million tons of gas, which will come from the Wiriager, Berau and Muturi areas.

Pertamina and its partners will invest some $1.5 billion to develop the two trains.(bkm)