Indonesia plans to raise LNG export to Taiwan

JAKARTA (JP): State oil and gas company Pertamina said on Thursday that it was planning to export more liquefied natural gas (LNG) to Taiwan from the Bontang LNG plant in East Kalimantan and the Tangguh plant in Irian Jaya.

Pertamina president Baihaki Hakim said that Pertamina was expecting to join a tender for the supply of between 1.5 million tons and 3 million tons of LNG to Taiwan.

"There is a chance for us...I received information that the Taiwan government wants at least two participants for the tender," Baihaki told reporters on the sidelines of a meeting with the House of Representatives' Commission VIII, which oversees energy and mining affairs among other things.

After Japan, Taiwan is the second largest buyer of Indonesia's LNG with imports of over 3 million tons per year.

In his written response to the Commission's questions, Baihaki said that the planned LNG supplies would be for Taiwan's Tatan Power Plant, which would be developed by Taipower in the northern part of Taiwan.

He said that bidders for the supply of LNG had to participate in the construction of an LNG receiving terminal unit which will supply gas to the power plant.

Gas company Tung-Ting Gas, in a partnership with an unidentified LNG producer from Qatar, is so far the only bidder for the construction of the LNG terminal and consequently Taipower has decided to extend the bidding period to this month.

He said that state owned petroleum Chinese Petroleum Corporation (CPC) was willing to join the tender for the project and was now forming a consortium with Beyond Petroleum (BP) for that purpose.

"In this regard, BP as the operator of the Tangguh project will participate as a foreign partner in the consortium (to supply LNG for the power plant), with the LNG supply expected to come from Tangguh," he said.

To obtain the LNG supply contract, he said, Pertamina had to offer competitive prices against those offered by its competitor.

He noted however that it was difficult to offer a competitive price for LNG from the Tangguh LNG plant because the LNG plant was a new project and the construction cost would boost the price of its gas.

"Without trying to be a pessimist, I must admit that the competition is tough," he said.

He noted however that Pertamina could still compete by offering cheaper LNG from the Bontang LNG plant, which is already in operation.

Pertamina initially expected to secure an LNG contract by the end of this year to kick off the five-year construction of the Tangguh project.

The Tangguh project, located in Berau Bay, will be fed with gas from the Wiriagar, Berau and Muturi areas, which have a proven reserve of 14.4 trillion cubic feet (tcf).

The Bontang LNG plant operates seven LNG trains and produces approximately 22 million tons of LNG per year.

Pertamina exploration and production director Gatot K. Wiroyudo said that to win the Taipower project, Pertamina could start Tangguh's construction even though there is demand for only one train or about 500 million cubic feet per day of gas (mmcfd).

He said that normally the construction of an LNG plant was only feasible if there was enough demand for at least two trains.

"For Tangguh, we can invest in just one train and still go ahead," he said.

Pertamina is also seeking to supply 3 million tons of LNG to power plants in China from the Tangguh LNG plant.

Baihaki said the tendering process for China's Guangdong LNG project was entering the second phase, in which the Chinese government would select potential foreign partners for the development of an LNG receiving terminal for the Guangdong LNG project.

He said that BP would join the tender for the construction of the LNG terminal.

"After the new consortium is formed, the tender of the LNG supply will be held, that is sometime in early 2001," he said. (bkm)