Pertamina Halts Talks With Japanese LNG Customers
Pertamina Halts Talks With Japanese LNG Customers
Grace Nirang Bloomberg Jakarta
PT Pertamina, Indonesia's state energy company, temporarily stopped talks on the extension of contracts with buyers of liquefied natural gas in western Japan after a former minister ordered a halt to new sales agreements.
Pertamina wants the Indonesian upstream oil and gas regulator, BPMigas, to clarify the status of gas sales contracts, the company's trading director, Ari Soemarno, told reporters in Jakarta today.
"We have stopped all negotiations for contract extensions with" buyers in western Japan, Soemarno said. "We are waiting for a clear direction from BPMigas. Before we have that, we won't negotiate."
Indonesia's former economy minister, Aburizal Bakrie, ordered a halt to the signing of new LNG sales contracts three days before he was replaced in a cabinet reshuffle. Bakrie gave the order in a Dec. 2 letter to state upstream oil regulator BPMigas, said Tubagus Haryono, chairman of the downstream regulator, in a phone interview in Jakarta today.
Indonesia, the world's largest LNG seller, wants to ensure domestic supply of gas to reduce oil import bills as reserves decline. Indonesia supplies countries including Japan, Taiwan and South Korea with about 25 million tons a year of LNG. Pertamina sells LNG to Japan, Taiwan and South Korea.
Demand for LNG is forecast to double to 264 million tons by 2010 and a further 62 percent by 2015, Citigroup Inc. said on Oct. 25.
Indonesian President Susilo Bambang Yudhoyono replaced Bakrie with Boediono on Dec. 5, appointing Bakrie as minister for people's welfare.
"The letter to BPMigas was not an order but a suggestion from the coordinating minister for economy. It is not meant as an instruction," Wimpy S. Tjetjep, deputy minister for mining and energy, said in Jakarta today.
Indonesia plans to halt some LNG sales to Japan when contracts expire in 2010, energy minister Purnomo Yusgiantoro said Nov. 11. The country is halving annual LNG sales to a group of buyers in western Japan that includes Osaka Gas Co. and Kansai Electric Power Co. to 6 million metric tons after 2010. These customers now buy 12 million tons of LNG a year from Indonesia's PT Badak NGL plant.
Indonesia's government wants to build a 1,227-kilometer (763- mile) underwater pipeline to link gas fields in East Kalimantan on Borneo to consumers on Java island to cut the use of oil products and reduce the import bill.
A government-sponsored study released last month said the country should scrap the pipeline plan because declining reserves will make the project uneconomical and draw gas away from the export market.
The government ordered the state downstream regulator, known as BPHilir Migas, to start seeking bids to build the US$1.2 billion project, Haryono said. The project may be completed by 2009, according to government estimates.
A decision not to extend 12 million tons a year of LNG contracts with Japanese buyers may cost Indonesia Rp 18 trillion ($1.8 billion) in annual export revenue, Zanial Achmad, deputy planning head at state oil regulator BPMigas and a member of the study team, said on Nov. 15.
Fields in East Kalimantan operated by Total SA, Chevron Corp., and Vico Indonesia, a unit of BP Plc and Eni SpA, supply PT Badak NGL plant, the world's largest LNG plant.
The decision to channel the gas to domestic market instead of exporting it in LNG form may discourage producers from investing in the development of new fields, said Ramses Hutapea, Yudhoyono's oil adviser at the Democratic Party.
"I'm not sure that Total, Chevron and Vico will maintain their spending to boost new fields if they have to sell the gas to the domestic market at half the price of LNG," said Hutapea, who was former head of LNG exports negotiating team in the 1990s.
LNG is natural gas that has been cooled for transport by ship. Import terminals return the LNG to gas form so that it can be sent through pipelines to customers such as factories, power stations and households.