Sat, 10 Aug 2002

Indonesia gears up to fulfill Fujian LNG supply contract

A'an Suryana, The Jakarta Post, Jakarta

The government said it would immediately send a task force to China to further discuss the liquefied natural gas (LNG) supply contract awarded by the Chinese government late on Wednesday.

"The task force was established on Thursday," Minister of Energy and Mineral Resources Purnomo Yusgiantoro told reporters at a media conference at his office.

China awarded Indonesia a contract to supply 2.5 million metric tons of LNG per year to Fujian province, after Indonesia failed to win a hotly contested deal to supply the commodity to Guangdong province. This deal was won by an Australian consortium, Australian LNG, led by Australian energy giant Woodside Petroleum Ltd., which will supply some 3 million metric tons of LNG per year over a 25-year period.

The LNG for Fujian will come from the Tangguh LNG project in Papua province, Indonesia, operated by Anglo-American energy giant BP Plc. LNG supply to Fujian is scheduled to commence in 2006.

The potential revenue to be received by BP and the Indonesian government from the LNG sale to China remains unclear, as details of the supply contract are not yet available.

"We welcome the Chinese government's decision and we have established a team to immediately put the contract into effect.

The team comprises officials from the Ministry of Energy and Mineral Resources, the implementation body of the upstream oil and gas sector (Balak), state oil and gas firm Pertamina and BP Indonesia," Purnomo said.

He said that the team had been tasked to discuss and negotiate terms for the Fujian LNG supply contract.

Reports said earlier that the Tangguh project had been chosen as the LNG supplier for Fujian on condition that BP adhered to the terms promised when it bid for the Guandong project.

BP initially bid for the Guangdong LNG supply contract, competing with five other bidders.

As competition between Indonesian and Australia heated up, leaders of both countries took turns to visit China in a bid to win over the Chinese government.

Purnomo dismissed suggestions that the Fujian contract was not economically viable for the Tangguh project as the contracted volume was only 2.5 million metric tons per year, compared with Tangguh's projected annual output of 3 million to 4 million metric tons.

"China is not the only market for Indonesia," said Purnomo.

Indonesia's traditional LNG markets were Japan, South Korea and Taiwan, while China was listed as a new emerging market.

What Indonesia should learn from the Guangdong case was that Indonesia should be more proactive in exploring LNG markets, and be more efficient in its LNG production, Purnomo said.

"Indonesia is seeking opportunities to sell LNG to the Philippines and the U.S.," said president of Pertamina Baihaki Hakim at the same media conference.

Pertamina is still in negotiation with a Philippine company for the sale of 1.3 million metric tons of LNG per year.

BP is expected to start development of the Tangguh project in 2003 and complete it in 2005.

Indonesia is estimated to possess 100 trillion cubic feet in LNG reserves, one of the largest in the world.