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.