RI may adjust LNG price formula
RI may adjust LNG price formula
Dow Jones/Jakarta
Indonesia has indicated it may adjust the formula that it uses to price contracts to supply liquefied natural gas to Japanese gas and power utilities, in a bid to keep their business.
At an energy forum in Tokyo on Friday, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said Indonesia in the years ahead would be more flexible with its LNG supply contracts in terms of the price formula.
Japanese buyers make up the bulk of the Southeast Asian nation's LNG customers.
"More flexibility is required for LNG contracts. LNG supply contracts should be win-win contracts," Katsuhiko Suetsugu, secretary general of the Asia-Pacific Energy Forum, quoted Purnomo as saying.
Delegates from Japanese power and gas utilities attending the forum complained that Indonesian LNG prices are higher than those from other countries, Suetsugu told reporters at a press briefing after the event.
The formula for Indonesia's long-term LNG contracts with Japanese buyers is linked to the average price of a basket of Indonesian crude oils, comprising mainly medium-grade, low-sulfur crude oil such as Minas crude, for which prices are higher than those of high-sulfur crude oils from Middle East, for instance.
Many other LNG producers typically sign long-term supply contracts with Japanese customers using a price formula linked to the average price of Japan's overall crude oil imports, widely known as the Japan Crude Cocktail, or JCC. The Japanese Ministry of Finance publishes the JCC monthly.
In 2010 and 2011, many of Indonesia's long-term LNG supply contracts with Japanese buyers will expire, with expiring contractual volumes expected to total 12 million tons.
Indonesia exported 15.5 million tons of LNG to Japan in the last fiscal year that ended March 31, 2004, indicating the country accounts for the largest share, or 27 percent, of Japan's overall LNG imports totaling 58 million tons.
Additionally, due to output problems at some of its gas fields, Indonesia has been forced to import LNG for the past several years. In fact, it has told several of its Japanese buyers that it can't fully supply the contracted volumes this year.
Delegates from Tokyo Electric Power Co. (9501.TO), Kansai Electric Power Co. (9503.TO) and the Ministry of Economy, Trade and Industry attended the energy forum.