BP wants to handle marketing of Tangguh gas project

BP Indonesia has proposed the newly established Implementation Body to allow it to handle the marketing of the Liquefied Natural Gas (LNG) to be produced from the company?s massive gas project in Tangguh, Papua, Koran Tempo reported on Monday.

The company?s request was unveiled by BP Indonesia?s vice president for government and public relations Satya W. Yudha in an interview with the newspaper?s reporter.

Satya said that the marketing should be handled by BP Indonesia as part of the company?s integrated operation in the development of the Tangguh gas project. With such a formula, the company will be responsible to carry out all the activities related from production to the shipment of the gas to the end users.

At present, production-sharing contractors only handle production activities as marketing and distribution of their gas or oil production are controlled by Pertamina. Under this formula, the portion of the production that must go to contractors are sold to Pertamina which then distribute it to the end users.

Satya said that under the proposed formula, the production of the gas that will go to the government as part of the production sharing arrangement should be sold to the contractor, which would then be responsible to sell it to the market.

BP recently joined the auction to supply China?s province of Guangdong about 3 million tons of LNG a year. The company, however, failed in the tender which was won by an Australian LNG producer.

Although BP Indonesia could not win the Guangdong tender, the oil and gas giant has been granted a contract to supply Fujian, other province of China about 2.5 million tons a year for 25 years.

Satya said that BP Indonesia recently opened a tender for the construction of a gas refinery plant for the Tangguh project. The company is still assessing which of three bidders including Bechtel, KBR and Chioyoda that would be awarded to carry out the US$200 million project. "We hope we will be able to decide the winner next month," he said.

The Tangguh LNG project, which is located in Papua, is now under preparation for construction. The project, which will absorb about $3 billion in investment is expected to start production by 2005. Pertamina is still negotiating on the sale of the Tangguh LNG to China. The project has proven gas deposit of about 14.4 trillion cubic feet.

BP Indonesia owns 50 percent stake in the project, with the other 16 percent by Mitsubishi, 12 percent by Nippon, 11 percent British Gas, 10 percent Kanematsu Corp, and the remaining one percent by Nissho Iwai. The project is developed under 70-30 percent production sharing contract in favor of the Indonesian government. (*)