Indonesia optimistic to win China's LNG tender

JAKARTA (JP): Indonesia will participate in a tender to supply China with 3 million tons of liquefied natural gas (LNG) from the Tangguh gas field in Irian Jaya, a senior government official has said.

The director general for oil and natural gas at the Ministry of Mines and Energy, Rachmat Sudibyo, said Indonesia would compete along with Malaysia, Australia and Qatar in the LNG tender, which he expects to take place in August.

"The Chinese government told us that they are currently preparing the tender documents, which they will have completed very soon, probably by next month," Rachmat told The Jakarta Post over the weekend.

Indonesia has long been lobbying China in a bid to find a market for the six million tons of gas the Tangguh project is estimated to produce annually.

Construction of the Tangguh project, worth US$1.5 billion, is pending the signing of a contract, which Indonesia is expecting to happen some time this year.

"We have a good chance of winning the tender," Rachmat said, adding that LNG buyers usually sign long-term contracts of 20 years.

He said Indonesia is known as the world's largest LNG exporter with a good track record for reliability.

Indonesia's LNG is also more competitive in price, because compared to its competitor, the country enjoys a shorter distance for transporting gas to China, he added.

Although no agreement has been reached between China and state-owned oil and gas company Pertamina, President Abdurrahman Wahid said on Friday that Indonesia would sell its Tangguh LNG to China.

He also said Indonesia would sell some LNG products from its East Kalimantan-based Bontang LNG plant to India.

President Abdurrahman said Chinese and Indian companies interested in buying Indonesian LNG, were asked to contact Pertamina and its partners.

The President made no explanations on his forecast, but his statement came while Minister of Mines and Energy Susilo Bambang Yudhoyono was returning from lobbying the Chinese government to choose the Indonesian LNG offer.

The minister went to China last week to market LNG from the Tangguh gas fields.

Rachmat, who accompanied Bambang during the visit, said the minister met with senior Chinese government officials and explained to them the potential of the Tangguh project.

"We told them (China) our position as an LNG exporter and how we can meet their demands for LNG," he said.

The Indonesian delegation also included Pertamina president Baihaki Hakim and president of oil and gas company BP Amoco Indonesia Bill Schrader, whose company is Pertamina's production- sharing partner in the Tangguh project.

The Tangguh project was initially developed jointly by Pertamina and Atlantic Richfield Co. (Arco), but BP Amoco acquired the project earlier this year and took over Arco's position.

Andrew Barton, head of energy analysis at BP Amoco Plc, has said China offers a huge market for Indonesia, due to the estimated rapid increase in energy consumption.

He said growing economies like China would prefer building gas power plants to coal or oil, as gas was cheaper and cleaner for the environment.

Barton also said Indonesia's LNG might find many potential markets in the Asia Pacific regions, including traditional buyers Japan, South Korea and Taiwan.

The Tangguh project located in Berau Bay has a proven reserve of 14.4 trillion cubic feet (tcf) and is expected to start production in 2005.

Its gas will come from the Wiriagar, Berau and Muturi areas and will initially supply two trains with an annual production capacity of up to six million tons of gas.

The Tangguh project is estimated to yield some $60 billion over the project's lifetime of about 30 years.

With the purchase of Arco earlier this year, BP Amoco is poised to become Asia's largest LNG producer, controlling 7 percent of the gas reserves in the region.

The company is also developing the Hainan gas field in China, which is the country's largest offshore natural gas find holding three trillion cubic feet of reserves. (bkm)