Tue, 04 Feb 2003

Pertamina to offer Tangguh LNG to Japanese buyers

Johannes Simbolon, The Jakarta Post, Jakarta

State oil and gas company Pertamina will offer liquefied natural gas (LNG) from the Tangguh plant in Papua to Japanese buyers during a tour of that country to renew various sale and purchase contracts.

Pertamina's president Baihaki Hakim said a Pertamina delegation would depart for Japan this week to negotiate with buyers whose contracts with the Badak LNG plant in Bontang, East Kalimantan, are to expire in a couple of years.

During the negotiations to renew the contracts, Baihaki said Pertamina would seek to persuade buyers to switch some orders to the Tangguh plant.

"Thus far, Tangguh has only got the Fujian order. This is not enough yet to make it economic. At least another 1.5 million tons (of LNG per year from Tangguh) can be offered to Japan," Baihaki said Saturday in Nusa Dua, Bali on the sidelines of the "Dialog Forum of Stakeholders"

Baihaki did not specify the Japanese buyers nor the expiry dates of their contracts.

Indonesia now has two LNG plants respectively located in Arun, Aceh, and Bontang, East Kalimantan. The Arun plant is owned by a consortium led by American firm ExxonMobil Corp, while the Bontang plant is owned by a consortium headed by French firm TotalFinaElf and America's Unocal Corp.

The Tangguh LNG plant, which is planned for the Bird's Head area of Papua, will be developed by a consortium led by Anglo- American firm BP PLC.

Last year, BP secured a deal to supply the Chinese province of Fujian with 2.6 million tons per year, but the project needs more orders to be economically feasible. BP plans to build two trains with a combined capacity of 7 million tons per year as part of the first phase.

Baihaki said Pertamina's move to offer the Tangguh LNG to Japanese buyers was in line with the government's commitment to the development of the Tangguh plant.

"(The development of) the Tangguh LNG plant is a national political commitment," he said.

Many LNG players are unhappy that Pertamina is still playing a leading role in marketing the country's LNG, citing that under the new oil and gas law, the state firm has lost its monopoly over the country's oil and gas industry and should be placed on a par with the other contractors in the industry.

Furthermore, they see a possible conflict of interest given that Pertamina also plans to build its own LNG plant in Donggi, Sulawesi.

But, Baihaki said BP Migas had authorized Pertamina, which handled the marketing of Indonesian LNG prior to the 2001 Oil and Gas Law, to continue marketing the LNG to Japan at the request of the Japanese buyers.

"The Japanese buyers are loyal and conservative. They do not want to buy LNG from anyone except Pertamina," Baihaki said.

A senior official of a multinational oil and gas firm noted, however, that it would not be easy for Pertamina to persuade the Japanese buyers to switch their orders to Tangguh from Badak.

"The reason is the same. The Japanese are loyal and conservative. They do not easily change suppliers," the official said Monday.