Indonesia to ink China LNG deal Thursday: Purnomo
Indonesia to ink China LNG deal Thursday: Purnomo
Maki Aoto, Dow Jones, Osaka
Indonesia will sign a long-term contract with China Thursday to supply liquefied natural gas (LNG) to Fujian province, energy minister Purnomo Yusgiantoro said.
A bilateral meeting in Bali Wednesday will be followed by a formal agreement the next day, Purnomo told Dow Jones Newswires in an interview Sunday on the sidelines of the International Energy Forum.
The Fujian contract is crucial for Indonesia after it lost out to Australia on a more lucrative, US$13 billion LNG supply contract to China's Guangdong province last month.
A consortium led by Indonesia's state-run oil and gas concern Pertamina and BP PLC will supply 2.5 million metric tons of LNG under the proposed contract to a planned terminal on the Fujian coast opposite Taiwan.
The LNG will come from the Tangguh gas field in Irian Jaya, Papua province, which BP is currently trying to develop.
Natural gas production from the Tangguh project is estimated at 3 million to 4 million tons a year. Tangguh had been tipped to win the Guangdong LNG supply deal.
China will start construction of the Fujian terminal in 2004, and is expected to start operations in 2006.
Purnomo said development of the Tangguh LNG project would follow strict economic principles.
"You are talking about a 20-year or 25-year contract," he said. "My team...is consisted of stake holders (in the Tangguh project) - the players, so if they agree, that means 'go ahead.'"
Purnomo also said that the award of the Guangdong LNG supply contract to Australia was "a comprehensive decision." It was believed that proposals by Indonesia and Qatar undercut those by Australia on price.
Most industry watchers said fears of potential supply disruptions due to separatist unrest in Papua province were a key factor in China's decision on the Guangdong project.
Japanese LNG importers have been hoping that competitive prices from the Tangguh LNG project would help push down LNG prices from other supply sources in Indonesia and elsewhere.
But Purnomo said Indonesia will continue to adhere to the current LNG pricing formula with existing customers under existing long-term contracts.
"The Tangguh project is different...it's a new project. You can't mix (projects) together," he said.
Indonesia is one of Japan's main sources of LNG, supplying some 8.2 million tons a year under a long-term contract that started in 1977.
"On December the 10th, we are going to celebrate the 25 years of marriage with the Japanese," Purnomo said. "Besides the business itself, you have loyalty, confidence with each other. Otherwise, you will divorce."