Pertamina wants to be LNG seller

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.