Amerada offers to waive LC requirement for gas supply to PLN

Gas producer Amerada Hess will waive its standby letter of credit (L/C) requirement and supply natural gas to state power firm PLN if the latter raises gas price to more than US$2.38 per million British thermal unit (MMBTU), an official of upstream oil and gas authority BPMIGAS said Wednesday.

“Amerada has submitted a proposal that it will revoke its LC requirement only if PLN increases gas price to more than $2.38 per MMBTU,” BPMIGAS vice chairman Kardaya Warnika told reporters.

PLN had proposed that Amerada sell its gas to it for no more than $2.38 per MBTU, Kardaya said.

Reports said PLN might fail to get an additional gas supply of about 140 million cubic feet per day (MMCFD) from Amerada Hess because its inability to meet the gas producer's requirement to provide standby letter of credit (L/C) worth US$120 million. The LC was meant to be the guarantee for the annual supply of the gas, while PLN was only able to provide LC of $36 million per quarter.

The 100 million MMCFD was meant for PLN’s power plant in Gresik, East Java, which currently needs at least 242 MMCFD of gas. At present, the plant receives most of its gas needs from BP Kangean but the supply from this gas field continues to show a decline. (godang)