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)