Tangguh inks third LNG deal
Tangguh inks third LNG deal
Fitri Wulandari, The Jakarta Post, Jakarta
British energy giant BP PLC signed on Wednesday a US$2 billion
deal to supply liquefied natural gas (LNG) from its Tangguh LNG
project in Papua province to South Korea's power company K Power.
BP will supply 600,000 metric tons of the fuel a year for 20
years starting from 2006 to K Power with an option for the South
Korean firm to ask for an additional supply of up to 200,000
metric tons per year.
K Power will use the fuel to fire a 1,074 megawatts power
plant which is under construction in Gwangyang, South Korea.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the deal was significant for Indonesia in maintaining its
lead in the LNG market.
"The contract will add more strength to Indonesia as a leading
LNG supplier," Purnomo said in a speech after witnessing the
signing of the deal by BP Indonesia's president Bill Schrader and
K Power's president Young Duk Park.
Indonesia has been struggling to maintain its position as a
top LNG producers in the increasingly competitive market. Last
year, Indonesia exported 26.5 million tons of LNG. The bulk of
LNG exports went to Japan (68 percent), followed by South Korea
(19 percent) and Taiwan (13 percent).
The contract with K Power was the third for the Tangguh
project. BP signed an LNG deal in 2002 to supply 2.6 million
metric tons to China's Fujian province for 20 years starting
2007.
Last month, it inked a deal to supply 550,000 metric tons of
the fuel to South Korea's steelmaker POSCO starting 2005.
With the three LNG deals, Tangguh project has a total sales
commitment of 3.75 million tons.
Eddy Purwanto, deputy head of finance and marketing of the Oil
and Gas Regulatory Body (BP Migas) said BP is expected, within
the next few months, to sign an LNG agreement with U.S.-based
energy firm Sempra Energy to supply 3.7 million tons a year of
the fuel to the western coast of the U.S.
Signing the LNG deal with Sempra will mean that the Tangguh
project has enough sales commitments to start construction.
Lukman Mahfoedz, senior vice president of BP Tangguh said the
production of Indonesia's third LNG plant has been rescheduled to
2008 from the initial 2007. The nation has already two LNG
plants, located in Arun, Aceh and Bontang, East Kalimantan,
respectively.
He said BP planned to seek the fuel from Bontang LNG plant or
from other plants to meet contracts which will become effective
before Tangguh begins production.
"We are talking with several (LNG) suppliers" Lukman told
reporters. He didn't give details on the plant.
The project is now seeking financing from a consortium of
foreign banks to finance the construction.
Lukman said the project will cost $5 billion, of which BP and
partners will cover $2 billion with the remaining $3 billion
expected to come from lenders.
Located in Berau-Bintuni region in Papua province, the Tangguh
LNG plant is expected to produce 7 million tons per annum in the
first phase of production. Gas fields, which will feed the plant,
have certified reserves of 14.4 trillion cubic feet (TCF).
BP holds a 37.16 percent stake in the project in partnership
with MI Berau BV (16.30 percent), CNOOC Ltd (16.96 percent),
Nippon Oil Exploration Berau (12.23 percent), KG Companies (10.0
percent) and LNG Japan Corporation (7.35 percent).