Tangguh LNG supplier BP, scores coup in U.S.

Tangguh LNG supplier BP, scores coup in U.S.

Johannes Simbolon, The Jakarta Post, Jakarta

Anglo-American energy giant BP Plc. has signed a multibillion
dollar agreement with U.S.-based Sempra Energy to supply
liquefied natural gas (LNG) to the United States' West Coast and
Mexico.

The preliminary contract was signed on Thursday in Washington
in a ceremony involving Minister of Energy and Mineral Resources
Purnomo Yusgiantoro, U.S. energy minister Spencer Abraham and
Mexican energy minister Felipe Calderon Hinojosa.

The deal with Sempra will give a significant boost to BP's
Tangguh project in Papua, where the LNG supplies will be taken
from. Until recently, the project was in limbo given the
reluctance of creditors to provide funds for the project due to
the small number of orders it had received.

The deal will also provide significant revenue for Indonesia
and, particularly Papua, one of the least developed regions of
the country.

The entry of Indonesian LNG producers into the U.S., the
world's largest consumer, will also boost Indonesia's profile as
the world's largest LNG exporter, a status that was just a few
months ago clouded by its failure to win some high-profile
contracts.

"This is very good news for Indonesia because it marks the
beginning of our entry into the U.S. (LNG) market, which will be
a key market in the future," Purnomo was quoted by Antara as
saying.

BP outbid LNG producers from Australia, Malaysia, Brunei
Darussalam and Qatar in competing for the LNG contract.

Under the deal, BP will supply some 3.7 million tons of LNG
per year to Sempra starting in 2007 and 20 years beyond that.
This will generate a total revenue of $10 billion for the
country, according to Purnomo.

Under the production-sharing contract, the central government
will take 70 percent of Tangguh's after-tax revenue, while Papua
will take 70 percent of the central government's revenue,
according Papua's autonomy law.

Last year, BP secured a contract to supply 2.6 million tons
per year to China's Fujian province. In August this year, the
firm signed initial contracts to supply a combined 1.5 million
tons per year to South Korean companies SK and Posco. SK will use
the LNG for its power plants, while Posco will use it in steel
production.

The deal with Sempra will bring the total orders for Tangguh
LNG to 7.8 million tons -- higher than the plant's initially
planned capacity.

It remains unclear whether BP will need to expand the capacity
of its Tangguh project due to the larger-than-expected volume of
orders.

The Tangguh LNG project will become the country's third LNG
plant after the Bontang (East Kalimantan) and Arun (Aceh)
facilities. Arun and Bontang have a combined installed capacity
of 31.6 million tons per year.