BP mulls Tangguh LNG capacity expansion

Anglo-American energy giant BP PLC said on Friday it was considering to expand the capacity of Tangguh LNG project in Papua to tap the booming LNG market but said it has no intention to rush the expansion.

?We are thinking about capacity expansion because our objective is to bring as much gas as possibility. BP, together with BPMIGAS is still studying the possibility. Our main focus now is to make the first phase project into reality,? BP Indonesia president Anne Drinkwater told reporters during a press briefing.

BP, the operator of Tangguh is building a huge LNG complex in Papua with first phase-annualized capacity of 7.6 MTPA.

Budiman Parhusip, BP Executive Vice President for Tangguh Development said that despite uncompleted financing talks to raise US$3.1 billion, he was confident that the project would remain on schedule to deliver gas late 2008. ?BP is confident that financing talks with consortium of Chinese banks, JBIC, ADB and other commercial banks would be sealed next year,? he said. Upstream regulatory body BPMIGAS chairman Kardaya Warnika earlier said that talks with JBIC, consortium of Chinese banks led by Industrial and Commerce Bank of China and ADB, which would provide the largest chunk of the fund are well underway. Budiman said that Tangguh participants would provide interim funding until funds from financiers would be disbursed.

Tangguh?s 7.6MTPA capacity is almost fully booked. CNOOC had booked 2.6MTPA for Fujian. South Korean firms SK and POSCO would jointly buy 1.1 MTPA and US energy trader Sempra Energy would buy 3.7 MTPA for North America market.

Drinkwater said while LNG sales purchase agreements with Sempra, SK and POSCO had become effective; BP has still in the process of finalizing SPA with CNOOC to make the deal effective. ?There are some terms and conditions that must be met to make the deal effective,? she said without further elaborating. She also refused to comment whether BP is seeking to renegotiate LNG price to Fujian, which, according to some industry sources, is extremely low. An industry source that is familiar with the matter confirmed that BP is mulling the possibility to renegotiate LNG price to Fujian with CNOOC. ?BP has mentioned that there might be possibility to renegotiate LNG price, but it is not official yet,? said the source. BPMIGAS Chairman Kardaya Warnika said that thus far BPMIGAS had not come with the idea to renegotiate LNG price.

Tangguh LNG deal to Fujian had been subjected to a lot of criticism as many are in the opinion that the price was too low. Fujian LNG deal was signed in 2002, at the time when crude prices are hovering around US$20 per barrel.(alex/godang)