BP may get short contract extension for Tangguh fields

The government and Anglo-American energy giant BP PLC may agree on a short contract extension for the natural gas fields that will supply natural gas to the planned Tangguh liquefied natural gas (LNG) plant in Papua Province, a senior official of BP has said.

Lukman Mahfoedz, senior vice president for Tangguh, said on Monday the extensions of the fields? contracts could be shorter than normal to match with the period for Tangguh?s LNG sales contracts.

?The negotiation with the government on the contract extension is about 80 and 90 percent completed. The deal is expected to be finalized by the end of this year,? Lukman said during the Bimasena International Energy and Mineral Conference 2004 in Jakarta.

A production sharing contract (PSC) is valid for 30 years. Normally, at the request of contractors, the government extends the contract for another 20 years.

BP plans to build two LNG trains at the Tangguh complex with annual capacity of around 7.6 million tonnes.

The LNG plant will get natural gas feedstock from the Wiriagar, Muturi and Berau PSC blocks, which together have combined reserves of 14.4 trillion cubic feet.

The contract for Wiriagar will expire in 2023, Muturi in 2022 and Berau in 2017.

The $5 billion Tangguh project, already has LNG supply contracts with China, the United States, Mexico and South Korea. The longest contract is with China?s Fujian province, which last 25 years from 2007 to 2032.

Earlier, director general of oil and gas at the Ministry of Energy and Mineral Resources Iin Arifin Takhyan also hinted that the Tangguh gas blocks could get a shorter than normal extension.

"We are considering giving BP gas block extension contracts just to meet their LNG sales contracts period," director general oil and gas Iin Arifin Takhyan told reporters.

BP, which leads the consortium that plans to build the Tangguh project, has submitted its final plan of development for the project.

A source of the upstream regulatory body, BP Migas, said the development plan already gets approval from the agency but has yet to be approved by the directorate general of oil and gas.

Lukman confirmed that the government asked for a larger split from the gas blocks during the extension period.

According to Lukman, another issue discussed during the current negotiations with the government is BP?s request that the government bear the risk in case Tangguh could not meet its supply obligation due a government?s act. (Alex)