Talks underway for Tangguh plant funding
The Jakarta Post, Jakarta
A BP-led consortium, which manages the Tangguh project in Papua, is in talks with the Japan Bank for International Cooperation (JBIC) and the Asian Development Bank (ADB) to secure the financing for the construction of the liquefied natural gas (LNG) plant.
JBIC is expected to provide US$1 billion, almost a third of the $3.5 billion required to build the LNG plant, the Upstream Oil and Gas Regulatory Agency's (BP Migas) deputy of marketing and finance Eddy Purwanto said on Friday.
ADB may provide between $300 million and $350 million, he added.
"The kickoff for the talks with ADB started yesterday (Thursday) in Manila," Eddy said.
BP Migas represents the government to supervise the British energy giant's operation as the contractor of the megaproject.
The Tangguh project -- the country's third LNG plant -- is estimated to cost up to $5.5 billion, including the construction of the LNG plant and other infrastructure. The BP-led consortium will pay for some $2 billion of the project, while the rest will come from lenders.
BP is already in talks with a consortium of Chinese banks, led by the Bank of China, to provide $1.3 billion. The two parties are still discussing the terms and conditions for the loans, said Eddy.
Some 18 other commercial banks, including Indonesian banks, have been invited to cover the remaining cost for the project.
"We hope local banks can participate," said Eddy, declining to mention the banks the consortium was talking to.
BP will provide bridging loans to cover the construction costs in the initial phase, pending their disbursement.
"The project is expected to start production in 2008 as scheduled," Eddy said.
Located in Berau-Bintuni region in Papua, the Tangguh plant is estimated to produce more than 7 million tons of LNG per annum in the first phase of production.
Tangguh is expected to offset the declining production at existing plants in Bontang, East Kalimantan, and Arun, Aceh, which have been operating for more than 20 years.
Gas fields in the Bintuni Bay that will feed Tangguh plant have certified reserves of 14.4 trillion cubic feet.
BP has so far secured deals to supply a combined 7.6 million tons of LNG worldwide, including to Sempra, K-Power, Posco and the Fujian terminal in China.