BP still negotiating with CNOOC over LNG price hike

Indonesia and BP Plc., are still negotiating with CNOOC Ltd., China?s No.3 oil company, for a higher price for liquefied natural gas from the Tangguh project, said Energy and Mineral Resources Minister Purnomo Yusgiantoro. The Jakarta Post reported on Friday.

?I can?t give you details but we?re in the middle of negotiating on higher prices,? Purnomo told reporters in Jakarta Thursday.

Indonesia wants to earn more for its LNG after crude oil prices rose to a record last year. CNOOC?s original agreement to buy gas from the Tangguh plant in Irian Jaya province was based on a maximum oil price of US$25 a barrel. Oil reached $67.19 today in electronic trading on the New York Mercantile Exchange. Prices are 44 percent higher than a year ago.

Indonesia in 2002 agreed a record-low price to supply LNG to China, matching the tariff offered by Australia?s North West Shelf. Since then, European and U.S. benchmark prices have risen more than sevenfold, prompting LNG producers to demand higher prices from Asian buyers under new contracts.

CNOOC may pay more than it earlier agreed for LNG from Tangguh, Kardaya Warnika, chairman of Indonesia?s state oil and gas regulator BPMigas said on Jan. 20.

CNOOC, which owns 17 percent of the BP-led project, will use the gas for power generation in Fujian province. Deliveries are scheduled to start in 2008.

China cut the annual volume to be delivered from Tangguh to 1 million metric tons over 25 years, from 2.6 million tons under a provisional agreement in 2002, Purnomo said in December. (*)