Mitsubishi mulls supplying Indonesia LNG to U.S. market

Tony Hotland, The Jakarta Post, Jakarta

The Mitsubishi Corporation is mulling supplying liquefied natural gas (LNG) from Indonesia to the California market in the United States.

Mitsubishi's energy business group manager in Jakarta Mauren Toruan said the firm's subsidiary Sound Energy Solutions had applied to the U.S. Federal Energy Regulatory Commission (FERC) and California's Port of Long Beach for a license to construct an LNG terminal at the port.

"After the filing, we will start serious negotiations to secure five million tons per annum of LNG for the terminal and send a delegation to Indonesia," said Mauren.

If the FERC and Long Beach authorities approve the LNG terminal project, Mitsubishi would start construction by the end of this year, aiming for completion in late 2007, he said.

The planned US$400 million terminal is designed to provide around 700 million cubic feet of gas daily, which will meet 10 percent of demand in California.

Mauren said the company favored Indonesia as the LNG supplier for its California terminal because of its flexibility in pricing.

Indonesia is willing to sell its LNG according to the U.S. pricing scheme, rather than the Japanese pricing scheme -- upon which Indonesia has been selling LNG for decades to the Asia- Pacific market.

"In the U.S., the price of natural gas moves separately from crude oil price ... LNG price in Japan is linked to crude oil price," said Mauren.

Japan is a traditional LNG buyer from Indonesia, along with South Korea and Taiwan.

Indonesia and other LNG producers in the region, including Australia and Malaysia, are eying the huge potential of the U.S. gas market.

Mauren said another reason for choosing Indonesia was because Mitsubishi also had a stake in Papua's Tangguh LNG project, which is being developed by a consortium led by Anglo-American energy giant BP Plc.