RI submits final bid for gas supply to China
The Jakarta Post, Jakarta
Indonesia had placed its final bid for a multi-billion dollar tender to supply China with liquefied natural gas (LNG) from the Tangguh LNG project in Papua, in an offer that includes granting Beijing a stake in the project.
Its developer, Anglo-American oil and gas company BP, is marketing the LNG on behalf of Indonesian state-owned oil and gas company Pertamina and the government.
BP Indonesia vice president for government and public affairs Satya W Yudha said the company submitted the final bid through BP International Marketing last Sunday in Beijing.
"There is no saying when they (China) will announce a winner, it's really their call," Satya told The Jakarta Post, adding that BP expected an announcement within one or two months.
Indonesia is running neck and neck with fellow LNG exporters Australia and Qatar for the supply contract.
The contract could be worth billions of U.S. dollars covering a period of up to 15 or 20 years with an annual supply of up to 3 million tons of LNG.
If Indonesia wins the bid it would kick start construction of Tangguh's two LNG trains, worth around $1.5 billion.
Satya said that to boost Indonesia's chances, BP had offered Beijing a stake in the Tangguh project.
"Our offer includes a certain amount of shares in the project... the figure is negotiable," he said, declining to name the figure.
But he added that price, country risk and flexibility were the three factors that China would use to select its LNG supplier.
Of these, he said, price was the most important.
Against Australia, Indonesia may offer a lower price as its shorter distance to China reduces the delivery cost.
But Qatar reportedly set its LNG cheap from the onset, with transportation costs being the only important price factor.
Indonesia stands to loose in terms of its country risk.
Government officials conceded that strife-torn Indonesia was no match for the more peaceful and stable Australia or Qatar in this regard.
Oil and gas or mining operations in restive provinces like Aceh and Papua have been targeted by armed groups in the past.
Last year, America's ExxonMobil Oil Indonesia Inc. suspended its Arun gas operation in Aceh following attacks by armed groups allegedly from the Free Aceh Movement.
The attacks against a foreign gas operation and the subsequent supply cuts badly hurt Indonesia's reputation as a reliable LNG supplier.
As in Aceh, Papua is home to a separatism movement, although it is less violent. Tangguh's remoteness poses a natural shield against security threats.
The giant province in the eastern most part of Indonesia has been entertaining America's gold mining company PT Freeport Indonesia since the 1960s without any major security problems.
Last week, a Chinese team surveyed the Tangguh LNG project and visited Indonesia's main LNG plants in Arun and Bontang in East Kalimantan.
On flexibility, Satya said that Indonesia offered China a back up LNG supply from Arun and Bontang.
He said chances were high for Indonesia to win the contract, with BP already having won the tender for the construction of an LNG receiving terminal in Guangdong.
Adding confidence to Indonesia's bid, the government has previously dispatched a number of high-powered delegations to Beijing.
One earlier this month was led by President Megawati Soekarnoputri - a move that Satya said demonstrated the government's strong support of the project.
"Government to government relations are very crucial," he said.