Tangguh to start construction in January

The Jakarta Post/Jakarta

British energy giant BP Plc. and its partners will start the construction of the Tangguh liquefied natural gas (LNG) plant in Papua in January next year, according to an official.

Rachmat Sudibyo, head of the country's oil and gas regulatory implementing body (BP Migas), said on Friday that if necessary, BP would provide the required funds in the early stages of the construction before banks disbursed loans for project.

"It will finance the construction by its own cash before the disbursement of the loan so it can start (construction) in January," said Rachmat Sudibyo.

BP and its partners are now completing the loan agreement with foreign banks including the Japan Bank of International Cooperation (JBIC), Rachmat said.

The construction was originally planned for the end of last year, but had to be delayed a couple of times as preparations took longer than expected.

The project is estimated to cost about US$5 billion, of which BP and partners will cover $2 billion with the remaining $3 billion expected to come from lenders.

The plant is expected to produce between seven to eight million tons of LNG per annum in the first phase of production.

Located in the Berau-Bintuni region, the gas field has certified reserves of 14.4 trillion cubic feet (TCF), in which BP -- along with other foreign partners -- has signed a 20-year contract as a partner of BP Migas to exploit.

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).

BP has so far secured deals to supply a combined 7.6 million tons of LNG worldwide, including to San Diego-based Sempra Energy, South Korea's K-Power Co. and steel maker Posco, as well as a plant in China's Fujian province.

Last year, BP named Halliburton Co.'s Kellog Brown & Root unit to build Tangguh.

Indonesia, which has abundant reserves of gas, was one of the world's top LNG producers but has been struggling lately amid the increasingly competitive market.

Last year, Indonesia exported 26.5 million tons of LNG, the bulk of which went to Japan (68 percent), followed by South Korea (19 percent) and Taiwan (13 percent).

Aside from Tangguh, Indonesia has two other LNG plants, located in Arun, Aceh, and in Bontang, East Kalimantan.