BP Migas says Kogas ready to negotiate new LNG contract

Indonesian upstream oil and gas authority BP Migas said Wednesday South Korea?s gas firm Kogas had signaled it was ready to begin talks over new liquefied natural gas (LNG) contract to replace Arun III contract, which will expire 2007.

?During my visit to Korea last week, Kogas indicated it would not seek for Arun III contract extension, but prefer to negotiate for new contract instead,? said Edi Purwanto, BP Migas deputy for financial and economic affairs in an interview with Petromindo.Com.

Edi said Kogas had signaled it was ready to negotiate new contract of the same volume with Arun III contract. Under Arun III contract, Indonesia supplies 2.8 million tons of LNG annually from Arun LNG plant in Aceh to Kogas starting 1986 for 20 years.

Edi said Kogas' move was understandable as it would try to take optimum advantage of LNG buyers' market by setting completely new terms of contract, which will lead to lower price and greater flexibility compared to Arun III contract, which was sealed in sellers' market condition.

Edi, however, did not say when negotiation would commence. He also declined to say the source of the LNG. Indonesia currently has two LNG plant in Arun, Aceh and Bontang, East Kalimantan. Another plant, Tangguh LNG is expected to come onstream in 2007. Gas reserves in Arun are dwindling and would not be able to continue operations beyond its current contracts.

Edi said Indonesia is not alone to try to win the contract. Australia?s North West Shelf Venture had been known to aggressively approach Kogas to win the contract, said Edi. North West Shelf had just bagged 0.5 million tons per annum of medium term LNG supply from Kogas.(alex)