Pertamina may amend LNG deals on buyers' request

Pertamina may amend LNG deals on buyers' request

JAKARTA (JP): State oil and gas company Pertamina said on
Thursday that it was ready to amend its existing liquefied
natural gas (LNG) contracts to meet buyers' wishes, provided that
they agree to purchase more LNG.

President Baihaki Hakim said that all of Pertamina's LNG
buyers have asked for cheaper LNG prices, shorter contractual
period.

Pertamina would agree to amend the existing contracts "as long
as it would result in a win-win deal," he said, adding that in
exchange for changes in the contracts, Pertamina would ask its
customers to buy a larger amount of LNG.

"(For instance), we will ask for their commitment to purchase
Tangguh," he said, referring to the planned Tangguh LNG project
in Irian Jaya, owned by a consortium led by Anglo-American energy
firm Beyond Petroleum (BP).

Pertamina's traditional LNG buyers are Japan, South Korea,
Taiwan. The company is also planning LNG sales to China and
India.

Indonesia, the world's largest LNG exporter, has dominated the
region's LNG market for decades, but competition has tightened
with the entry of new producers, like Qatar and Malaysia. This
has also strengthened the bargaining power of LNG buyers.

Baihaki said requests by buyers for more flexibility and lower
LNG prices indicated the greater bargaining power of buyers.

He said that for future LNG projects, Pertamina must heed
market demands for flexibility in their contracts.

"We must be really responsive, no more take it or leave it,"
he added.

Most of Pertamina's LNG contracts last for about 20 years but
the company recently said it was ready to shorten the contract
period to between 10 and 15 years or less.

The company further said it might offer incentives to buyers,
such as a more favorable transportation scheme.

The shipment of Indonesian LNG has been controlled by Humpuss
Intermoda Transportasi for some time now, which is linked to
former President Soeharto's son Hutomo Mandala Putra. Many LNG
buyers have not yet had the chance to gain revenue from the
shipment of LNG.

Baihaki said he recently offered Korea Gas Corp. (Kogas) a
number of opportunities while discussing prospects of new LNG
deals.

"I have asked Kogas to join us in building a refinery, why
not, we could also cooperate in shipping (the LNG), there are
plenty of business opportunities," Baihaki said.

"We have to be creative to involve them," he added.

Pertamina has long been known as a reliable LNG supplier,
though the recent suspension of its Arun gas fields in Aceh has
tarnished that reputation.

Gas fields at Arun have remained closed since mid-March, after
its operator, American oil and gas giant PT ExxonMobil Oil
Indonesia Inc, abandoned their fields due to continuous
harassment by local rebels.

The move caused the nearby Arun LNG plant to run out of its
natural gas supply, thus halting LNG exports to South Korea and
Japan.

Baihaki said the two countries had inquired when ExxonMobil
could resume its Arun operation, though neither of them had plans
to end their contracts with Pertamina.

He was responding to reports that Kogas had threatened to seek
new LNG suppliers if Pertamina was still unable to set a date for
Arun's operation by the end of this month.

Baihaki said it's unlikely that Kogas would sign new LNG
contracts just to cover a shortage in the near future.

"A contract now means delivery for the year 2004 or 2005," he
explained.(bkm)