Japan asks for better LNG prices
Japan asks for better LNG prices
Fitri Wulandari, The Jakarta Post, Jakarta
Japan says it is still interested in buying liquefied natural gas
from Indonesia but wants more competitive terms and conditions in
future contracts.
Japan's Director General of Natural Resources and Energy
Policy at the Ministry of Economy, Trade and Industry Hiroyuki
Ishige said Indonesia remained a very important LNG supplier to
Japan.
However, Japanese buyers, such as electricity companies,
expect "improving terms and conditions" in future contracts.
"We hope the (future contractual) conditions will have
economical advantages and be more competitive for us," Hiroyuki
said at a media briefing.
Asked about prices and contract lengths preferred by Japanese
buyers, Hiroyuki said it depended upon the outcome of discussions
between buyers and their counterparts in Indonesia.
"I don't know the period of future contracts. This is a
business issue, and the government does not intervene in business
deals," Hiroyuki remarked.
Hiroyuki was in Jakarta to attend the Indonesia-Japan Energy
Roundtable (IJERT) meeting along with some 38 delegates
representing Japan's energy industry, consultants, trading houses
and associations.
Japan is one of Indonesia's traditional LNG buyers. Others are
South Korea and Taiwan.
The government has been campaigning both the Japanese
government and businesses as some LNG sales contracts with
Japanese buyers expire in 2010. Among the buyers are Kansai
Electric, Kyushu Electric, Nippon Steel, Tohoku and Tepco, with
total contracts for 10.15 million tons of LNG per year.
Should the Japanese firms not renew their contracts, Indonesia
would lose billions of dollars of potential revenue.
Indonesia faces tough competition from LNG producers such as
Australia, Qatar and Russia, who have been aggressively
campaigning Japan to switch to them by offering lucrative
contracts.
Reports say Japan wants more flexible, short-term contracts
with Indonesia. At present, LNG contracts can be for up to 25
years. Japan also asks that LNG supply be taken from different
sources and not just one.
Currently, Indonesia has two LNG plants: one located in
Bontang, East Kalimantan, and the other in Arun, Aceh, with a
total production capacity of 31.6 million tons.
A third LNG plant, Tangguh, is being developed by a consortium
led by Anglo-American energy group BP Plc at the Bird's Head area
of Papua.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the government had explained the advantages of maintaining
Indonesia as Japan's LNG supplier.
"We have multi sources, better pricing and better proximity
compared to Middle East sellers. We also offer flexibility (in
terms and conditions) in contracts," Purnomo said.
According to Purnomo, the government has submitted initial
proposals for extension of the contracts. The government expects
to get 12 million tons per year for the next contracts.
IJERT is an annual meeting organized by the Indonesian
Ministry of Energy and Mineral Resources with Japan's Asia-
Pacific Energy Forum (APEF). Monday's meeting was the fourth.
In the forum, both parties discussed various issues concerning
cooperation in the energy sector, including transfer of
technology and exchanging information on energy policy.
Purnomo said the forum had become significant amid the change
in the global LNG market from seller-driven to buyer-driven due
to the increase in producers.
The forum is expected to formulate a strategic partnership
between both countries to increase energy supply and demand
security.