LNG sales effort to resume this month

Fitri Wulandari, The Jakarta Post, Jakarta

The Oil and Gas Upstream Regulatory Body (BP Migas) will resume negotiations with a number of buyers in a bid to close some deals on the sale of liquefied natural gas (LNG), a senior official said.

Eddy Purwanto, BP Migas deputy for finance and marketing said they would resume talks with South Korean buyers, oil refining company SK Corp. and steelmaker Posco this month.

The negotiation is expected to result in a final contract in April to sell 1.13 million tons of LNG per annum to the two companies, Eddy said.

Last year, BP Migas signed a preliminary contract with SK Corp. and Posco to supply the companies with LNG from Indonesia's third LNG plant Tangguh in Papua province.

Under the $1.5 billion agreement signed on Aug. 10, BP and its partners will supply SK Corp. with 580,000 tons of LNG a year for 20 years starting in 2005. In a separate signing ceremony on Aug. 14, BP will sell Posco 550,000 tons of LNG per annum for 20 years, valued at $1.43 billion.

LNG is frozen for shipment. Upon arrival at a receiving terminal, the LNG will be warmed to a point that it can flow through pipelines.

Other negotiations will resume this month between BP Migas and Marathon Oil Corp. to supply the U.S. West coast with around 6 million metric tons of LNG per annum for twenty years, possibly starting in 2007. BP Migas signed a preliminary agreement in July 2003 with Marathon.

"We're continuing talks with Marathon. We hope to sign a preliminary contract as soon as possible... at least by February," Eddy said.

Eddy said the supply for Marathon could be taken from the Donggi gas field in East Kalimantan.

The U.S. company has an ongoing project of building an LNG receiving terminal in Mexico.

At the end of 2003, BP Migas signed a preliminary contract with another U.S.-based oil and gas company Sempra Energy to supply some 3.7 million tons starting in 2007 for a period of twenty years.

The deals are expected to earn the government a total of $10 billion.

Indonesia has been struggling to keep its position as the top LNG exporter in the world amid tight competition from Australia, Malaysia and Qatar.

Every year, Indonesia produces some 3 trillion cubic feet of natural gas, of which some 65 percent is exported in the form of LNG and the remaining 35 percent for domestic use.

Indonesia has two currently operating LNG plants: Bontang in East Kalimantan and Arun in Aceh which have a combined capacity of 31.6 million tons per year. Tangguh is set to come online soon.

Last year, the country suffered failures in securing high- profile deals before getting the U.S. contract. It is also a positive step that the country's oil and gas producers have been able to enter the U.S. market, the largest energy consumer in the world.