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Indonesia, the world's second largest gas exporter, said
Monday it wanted to renegotiate its export contracts with South Korean
firms to try to get a higher price for the liquefied natural gas (LNG)
to be supplied from the Tangguh LNG plant.
Purnomo Yusgiantoro, Energy and Mineral Resources Ministers, said
during a meeting with the House of Representatives that Indonesia was
seeking to increase the selling prices of LNG to energy firm SK power
and steelmaker Posco.
Purnomo declined, however, to state how much the new price to be
offered to the buyers would be, saying the matter was still under
discussion.
Under the original contracts, starting 2008, Tangguh will supply SK
Power with 0.55 million metric tons per annum (mtpa) for 20 years at a
price of US$3.5 per million British thermal units (mmbtu), while Posco
will be supplied with 0.55 mtpa over 20 years at $3.36 per mmbtu.
The original agreements were all based on a maximum oil price of $25 a
barrel.
During the meeting, Purnomo also said that the government was planning
to talk to U.S.-based firm Sempra Energy Corp., with which it has
agreed to deliver 3.7 metric tons per annum (mtpa) of gas from Tangguh
for 20 years at $5.9 per mmbtu.
However, Purnomo said, this renegotiating plan had little to do with
price, but was more concerned with the government's wish to reallocate
some of the LNG supplies, which were to have been sold to the West
Coast-based company, to Japan.
"We hope that we can benefit more from the changes in the contracts,"
said Purnomo.
When asked if it was possible to change the binding contract with the
U.S firm, he said a clause in the contract allowed one of the parties,
bet it the buyer or supplier, to allocate some of the LNG shipments to
a third party as long as the new contract benefited all parties.
"We have the chance to get higher prices from Japan," Purnomo said,
adding that the government had yet to determine the percentage that
would be reallocated.
Last year, the government managed to increase the selling price of
Tangguh's LNG to China's CNOOC to $3.35 per mmbtu by renegotiating the
original contract using a new maximum oil price of $38 a barrel.
The original contract, under which the Tangguh plant is to supply 2.6
mtpa of LNG annually for 20 years to generate power in Fujian province,
set the price at $2.6 per mmbtu.
The Tangguh plant, which has a production capacity of 7.6 metric tons
per annum and has three trains, is expected to commence initial
production from the first train by the fourth quarter of 2008, and the
second train in the first quarter of 2009.
Last week, Upstream Oil and Gas Regulatory Agency (BP Migas) chairman
Kardaya Warnika said the construction of the plant, which will be fed
by proven reserves amounting to 14.4 trillion cubic feet (tcf), was 70
percent completed.
BP Indonesia has a 37.16 percent stake in the project, while CNOOC has
a 16.96 percent stake, with the remainder being held by a number of
Japanese firms.
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