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.