Japanese LNG buyers to extend contracts

NUSA DUA, Bali (JP): Two of Indonesia's major liquefied natural gas (LNG) buyers have reached an initial agreement with Pertamina to extend their contract to buy LNG from the Arun LNG plant in Aceh, the state-owned oil company said here on Thursday.

"We and the buyers from the eastern part of Japan have reached the basic principles to extend the LNG-sale contract. But, we have yet to finalize the details before striking a deal," Pertamina's director for general affairs Hadi Daryono said on Thursday on the sidelines of the Indonesian International Oil and Gas Exhibition and Conference.

He believed the deal could be signed between the end of this year and the first quarter of next year.

Hadi said the Japanese buyers -- Tokyo Electric and Tohuku -- had indicated that they wanted to continue buying 1 million tons of LNG from Arun annually for another five years starting from 2005.

Both companies currently buy a total of 3.5 million tons of LNG from Arun under a long-term contract ending in 2005.

He said the Japanese buyers currently bought LNG only from Indonesia but they had decided to buy the commodity from several suppliers, including Malaysia, Australia and Middle East, rather than only one supplier.

"Anyway, although their demand is decreasing, we still feel happy in view of the fact that they still buy our LNG amid the tighter competition in the LNG market.

Arun has six trains with a production capacity of 12.3 million tons per year.

Aside from Arun, Indonesia has another LNG plant in Bontang, East Kalimantan which has seven trains with a production capacity of 18.3 million tons per year.

Pertamina has also planned to build the country's third LNG center in Wiriagar, Irian Jaya where American company Atlantic Richfield (ARCO) and British company British Gas had found a huge natural gas reserve.

Indonesia is the world's largest LNG exporter controlling 43 percent of the Asia Pacific LNG market with an annual export of 28 million tons.

Hadi said the construction of the eight train of the Bontang LNG plant -- popularly called Train H -- was expected to be completed in November this year.

"The operation of Train H will increase production capacity of the Bontang LNG plant to 21.64 million tons per year," he said, adding the additional output would be bought by Taiwanese buyers.

Taiwan, Japan and South Korea are the regular buyers of LNG in the region.

But, LNG producers in the region are currently eying market potentials in China which has planned to replace coal with gas for its power plants.

Hadi said Pertamina had been intensively marketing the Wiriagar LNG to China in competition with other producers, including Australia. (jsk)