RI signs initial LNG agreement

RI signs initial LNG agreement

Bloomberg, Jakarta

Indonesia, the world's biggest exporter of liquefied natural
gas, signed an initial agreement with Marathon Oil Corp. to
market LNG to the U.S. and Mexico.

Indonesia would supply 6 million to 10 million metric tons of
LNG a year under the proposed agreement, Iin Arifin Takhyan,
director general of oil and gas, told reporters in Jakarta. A
final agreement may be reached early next year.

"We are hoping to see some concrete steps by the end of the
year," Rachmat Sudibyo, chairman of Indonesia's Upstream Oil And
Gas Implementing Agency, the industry regulator, said in an
interview. "If things run smoothly we can conclude the deal in
the first or second quarter of next year."

Indonesia is seeking new markets for its LNG because rival
producers Malaysia, Australia, Qatar and Oman are boosting output
as they compete to supply the fuel to Japan, South Korea and
Taiwan, Asia's biggest buyers.

LNG demand from Mexico and the U.S. West Coast may double
after Marathon Oil builds a receiving terminal in Baja, Mexico to
return LNG to a gas form, said Eddy Purwanto, deputy for finance
and marketing at the industry regulator. LNG is natural gas that
has been chilled and compressed so it can be transported in ships
over distances that are too far for pipelines.

The gas may come from PT Badak NGL in Bontang, the world's
largest LNG plant, or from Tangguh, Indonesia's third LNG plant,
which BP Plc plans to build in the easternmost province of Papua.
Last week, Rachmat said Indonesia would start delivering the LNG
to Marathon Oil in 2007 under the preliminary agreement.

A fourth LNG plant in Donggi, Sulawesi, which state oil
company Pertamina and PT Medco Energi Internasional plan to
build, may also supply the fuel, Rachmat said last week.