RI mulls cutting LNG price for Japan

The Jakarta Post, Jakarta

The government is mulling whether to lower the price of liquefied natural gas (LNG) for Japanese buyers, so as to better compete with other LNG producers.

"The price that we will offer will not be as high as in previous years," Minister of Energy and Mineral Resources Purnomo Yusgiantoro was quoted as saying on Thursday by Tempo online. He did not provide any information on the new price.

The price of LNG is currently set at between US$2.20 and $2.40 per million British thermal unit (MMBTU).

The minister's remark signals that the government is taking Japanese buyers' call for a more competitive pricing scheme for LNG sold to the country into serious consideration.

Japan is one of Indonesia's traditional LNG buyers, as are South Korea and Taiwan.

The government is making concerted efforts to retain Japanese buyers' loyalty in purchasing LNG from Indonesia, as some of their LNG sales contracts are due in 2010.

Indonesia's competitors, including Australia, Qatar and Russia, have been pursuing Japan aggressively by offering more competitive contractual terms.

Indonesia will lose billions of dollars in potential revenue if the Japanese firms do not renew their contracts.

Purnomo said the two countries would discuss the matter further on the sidelines of the October ASEAN Summit in Bali.

Currently, Indonesia has two LNG plants, one located in Bontang, East Kalimantan, and the other in Arun, Aceh, with a combined production capacity of 31.6 million tons.

A third LNG plant, Tangguh, is under development by a consortium led by Anglo-American energy group BP Plc. in Bird's Head, Papua.