BP not relying on U.S. for Indonesian LNG sales; waits on China: Report

BP PLC, Europe's top oil company, said high transport costs may deter sales of liquefied natural gas from a plant it aims to build in Indonesia to the U.S., as it waits for the result of a bid to supply China, Bloomberg reported Tuesday.

As many as seven terminals have been proposed for the U.S. West Coast and Mexico to convert LNG back into gas. Still, not all of those are likely to be built, Anne Quinn, BP's group vice president of gas, power and renewable, said in an interview.

Royal Dutch/Shell Group and other oil companies want to ship Asian LNG across the Pacific to tap U.S. gas prices that have risen by more than a fifth this year. Still, with distances of as much as 8,111 nautical miles from fields in LNG producing countries such as Australia and Indonesia, Quinn said transport costs may be prohibitive.

?With higher gas prices in the U.S., it's very tempting to see that as an option for excess Asian supply but it's an awfully long way from Indonesia, from Australia, for things to travel,? she said during the Asia Oil & Gas Conference in Kuala Lumpur.

BP needs to find buyers for LNG from its proposed US$2 billion Tangguh project in Indonesia so it can give the go-ahead to develop the fields before the end of the year. BP and Indonesia's state oil company Pertamina have a letter of intent to sell LNG from Tangguh to the Philippines, Quinn said.

Tangguh is one of three projects shortlisted for a contract to supply 3 million tons of LNG a year, worth about US$600 million based on recent prices in Japan, to a new terminal in China's Guangdong province. It's vying with Qatar and Australia's North West Shelf -- in which BP owns a one-sixth stake -- to supply the world's fastest-growing LNG market.

BP, which also owns 30 percent of the Guangdong LNG terminal, doesn't know when China National Offshore Oil Corp. will reveal who has won the contract, Quinn said.

?We will sit and wait for them to call,? she said. ?There will be some natural window where it could actually begin to interfere with the timing of the terminal but they're not at that stage yet. Terminal work is progressing independently, so it's not holding things up just yet.?

Tangguh, to be built and operated by BP, will be Indonesia's third LNG production center, after PT Badak LNG at Bontang on Borneo Island and PT Arun LNG on Sumatra island. BP owns half of Tangguh's 14.4 trillion cubic feet of proven gas reserves.

The partners in Tangguh need to finish technical work, find customers and finish talks with the government before the project can receive final approval, Quinn said.

In January, El Paso Corp. said it signed an initial agreement with Pertamina to buy 3 million tons a year of LNG to supply the U.S. West Coast. It also said it was in talks with Malaysia's state oil company Petroliam Nasional Bhd. and Phillips Petroleum Co., a partner in an LNG project in the sea between Australia and East Timor.

El Paso and rivals such as ChevronTexaco Corp. and Royal Dutch/Shell Group have proposed building LNG receiving terminals in Mexico and California.

?There's been a lot of discussions about (the plants) but I don't see anyone any closer to cutting steel or getting something on the ground,? Quinn said. ?It's still going to take some time to sort out.? (*)