Pertamina wants to be LNG seller

A'an Suryana, The Jakarta Post, Jakarta

State-owned oil and gas company Pertamina has made a proposal to the government to be made the sole seller of Indonesian liquefied natural gas (LNG).

The proposal, however, has been met with resistance from oil and gas contractors.

"Pertamina has more than 25 years of experience in the industry," Pertamina spokesman Ridwan Nyak Baik said here on Thursday during a seminar on LNG.

Pertamina, which handled the marketing of Indonesian LNG for decades, has been commended for helping turn Indonesia into the world's largest LNG exporter.

But the new oil and gas law, which took effect last year, stripped it of its monopoly over the industry, including its sole right to sell Indonesian LNG. Under the new law, contractors may sell their LNG by themselves.

Pertamina has been transformed into a common company, with its authority over the country's oil and gas upstream sector transferred to a new agency called BP Migas.

Last year, the government assigned Anglo-American energy firm BP PLC, the head of the consortium that owns the Tangguh LNG project in Papua, to market the Tangguh LNG to China. It was the first time a private company handled the marketing of Indonesian liquefied natural gas.

But after Indonesia lost out to Australia for a contract to supply LNG to China's Guangdong province, the government assigned a marketing team headed by a senior Pertamina official to follow up on China's offer of the Fujian LNG contract. This contract was signed last month by Pertamina, not BP.

Following its "success" in clinching the deal with China for the Fujian LNG contract, Pertamina has intensified its campaign with the government to be made the sole seller of LNG.

And at least one local oil and gas industry expert supports this proposal.

With Pertamina selling Indonesian LNG it improves the chance of Indonesia winning LNG contracts, because buyers will be assured of the security of supply given that Pertamina manages the Arun LNG plant in Aceh and the Bontang LNG plant in East Kalimantan, R.O. Hutapea said.

"If there is damage at one LNG plant, Pertamina could ask other LNG plants in the country to cover its supply obligations," Hutapea said, adding that a contractor like BP did not have this option.

Contractors, naturally, are not terrible enthusiastic about Pertamina's proposal.

BP, for example, said the single seller scheme would be unfair for LNG players in Indonesia, with Pertamina no longer the regulator but rather a market player.

Pertamina has discovered a huge gas reserve in the Donggi area of South Sulawesi and plans to set up its own LNG plant there.

"The single seller scheme would spark conflicts of interest for Pertamina," said Briton Gerry Peereboom, the president director of Tangguh LNG.

BP is proposing a compromise that would allow contractors to be involved in the marketing of LNG.

In the case of the Tangguh plant, Peereboom said, BP had agreed not to sell the LNG by itself, but it was also opposed to making Pertamina the sole seller.

"We are proposing the Tangguh Marketing Board, which consists of BP Migas, Pertamina and BP," Peereboom said.

The government has not yet decided on the matter, but Ridwan said the government was leaning toward setting up an "Indonesia Inc.", which would have the authority to sell Indonesian LNG.

The body, whose goal would be to help Indonesia retain its position as a top LNG producer, would consist of BP Migas, Pertamina, the Indonesian Gas Association and contractors.