RI eying Chinese LNG market

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Indonesia is seeking to supply the growing Chinese liquefied natural gas (LNG) market as part of its expansion strategy, a senior government official says.

Director general of oil and gas Rachmat Sudibyo said Saturday that in addition to the 3 million ton per year demand from the Guangdong province, two other Chinese provinces had also expressed interest in establishing an overseas LNG supply.

"This is a good opportunity for us as we plan to diversify our LNG markets," he told The Jakarta Post.

He said that one of the two provinces seeking LNG from outside China was Beijing. He did not remember the other one.

He said that the LNG demand from the two provinces would at least 3 million tons per year.

Japan is Indonesia's largest LNG market, followed by Taiwan and South Korea. These countries have signed long-term supply contracts with Indonesia.

Currently, Indonesia has two LNG plants, the Arun plant in Aceh and the Badak plant in East Kalimantan. The plants are jointly owned by the state-owned oil and gas firm Pertamina and its foreign partners.

Pertamina is also developing a third plant called the Tangguh LNG plant in the Papua province.

Pertamina and an Indonesian subsidiary of British American giant BP submitted last week their joint bid to supply LNG to the Guangdong province.

A deal with China would pave the way for full-scale construction of the Tangguh LNG plant, a joint project involving Pertamina and BP Indonesia.

The Guangdong province offers potential sales totaling 3 million tons of LNG annually, beginning in 2005.

Pertamina is competing with suppliers from Australia, Malaysia, Qatar, Iran, Yemen, and Russia.

The tender process will be completed in about three months, with only one supplier to win the contract.

Five top Indonesian economic ministers flew to China earlier this week as part of efforts to help Pertamina and BP win the LNG contract.

China has been aggressively promoting the use of LNG in many sectors of the economy as part of its plan to provide clean energy in the future.

But it must import some of its gas demand through pipelines or by ship due to a lack of domestic reserves.

Rachmat said that the government would also try to seek other LNG markets overseas.

Recently, Pertamina signed a memorandum of understanding to supply 1.3 million tons of LNG per year to the Philippines from the Tangguh project.

Rachmat said that another potential market for Indonesian LNG was the U.S.

"I'm optimistic we will be able to find new LNG markets as the world is turning to gas from oil," he said.