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).