Japan 'will not reduce' LNG purchase commitments

Japan 'will not reduce' LNG purchase commitments

JAKARTA (JP): Newly appointed president of state oil and gas
company Pertamina, Baihaki Hakim, denied on Monday media reports
that Japan would reduce its liquefied natural gas (LNG) imports
from Indonesia.

"Japan is not reducing its LNG import commitments. What is
true is merely that there was one purchase contract which would
expire in 2004, which will be extended with a reduced quantity
and a shorter tenure," he said.

Reports said Tohoku Electric Power Co. and Tokyo Electric
Power Co., both Japanese customers, would cut LNG imports from
Indonesia by 2.5 million metric tons annually to a combined one
million tons per year after the current contract expires in
December 2004.

Under existing contracts, Indonesia exports 18.2 million tons
of LNG annually to Japan.

Baihaki said a small decrease in imports by one or two
customers would not constitute reduced LNG commitments by Japan.

"We are optimistic we can keep the Japanese market in the
future, at least at the current level, through aggressive
marketing and negotiations," he said at a hearing with House of
Representatives Commission VIII for mining and energy.

Concerning who would operate the Coastal Plains Pekanbaru
(CPP) oil block after PT Caltex Pacific Indonesia ended its 30-
year production sharing contract in August 2001, the former
Caltex president said a new deal was being discussed by
Pertamina's board of commissioners.

"The management of Pertamina is no longer involved. It is now
the authority of the commissioners," he said, adding the
management's role was reduced to giving recommendations.

Parties interested in having a share in the CPP project after
the contract expiration are Pertamina, Caltex and the Riau
provincial government, Baihaki said.

Pertamina and Caltex have reached an initial agreement on the
ownership of a joint venture which would be established for the
oil block.

Baihaki said that Caltex, which previously insisted on
becoming a majority shareholder, had agreed to give Pertamina
between 51 percent and 60 percent in the planned joint venture,

"But now we have the Riau provincial government which is also
interested in the project. It needs to be negotiated further," he
said.

Still to be decided is whether Riau's stake would reduce
Pertamina's holding or Caltex's, Baihaki said.

Legislators said during the hearing that the Indonesian
parties, consisting of Pertamina and the Riau government, should
be granted at least a 70 percent share in the operation.

About the House's recommendation to Pertamina to cancel a
tender contract granted to foreign firm McDermott for the
construction of a natural gas pipeline between West Natuna and
Singapore, Baihaki said the government and Pertamina believed the
selection should remain.

Unilaterally canceling the contract would harm the ongoing
process of the 560-kilometer submarine pipeline construction,
already at 63 percent completion.

"If things go smoothly, the construction would be fully
completed by December 2000, or about four months earlier than the
initial plan," he said.

McDermott, a subsidiary of U.S. firm J Ray McDermott SA, was
alleged to have colluded with Pertamina officials by using inside
information to beat out other bidders in March last year.

The company won the tender with the lowest bid of US$335
million against other interested parties, including Italy's
Saipem, France's ETPM and Nippon Steel of Japan.

Baihaki also said Pertamina was mulling charging local export-
oriented companies for their purchased fuel at the going
international prices in the U.S. dollar.

Local companies using foreign-flagged ships were required to
pay for their fuel in dollars at international prices, he told
the House.

Baihaki argued that local exporters would have to be as
efficient as their counterparts in other countries who pay for
their fuel at international prices.(udi/10)