BPMIGAS expects LNG talks with Mitsubishi to intensify

Indonesian upstream regulatory body BPMIGAS expects LNG supply talks with Japan?s Mitsubishi Corp. to intensify after the latter bagged crucial approval that allowed it to go one step further to realize plan to develop a receiving terminal in Long Beach, California.

BPMIGAS deputy chairman in charge of marketing Eddie Poerwanto said that Mitsubishi and BPMIGAS had held talks in Jakarta recently and would be followed-up by further talks.

?Mitsubishi is eager to conclude negotiations quickly,? he said.

Mitsubishi through its wholly-owned subsidiary Sound Energy Solutions, together with US oil firm ConocoPhillips is planning to build an LNG receiving terminal with a send-out capacity of 700 million cubic feet of gas per day (MMCFD) with a peak capacity of 1,000 MMCFD. The facility is initially expected to become operational in 2008 upon receiving permit approval from the Federal Energy Regulatory Commission and California state agencies.

The proposed US$400 million terminal had been involved in a tug of war between the Federal Energy Regulatory Commission (FERC) and the California Public Utilities Commission -- with each claiming the authority to approve or reject the project.

The issue was finally settled this summer when Congress passed broad energy legislation that included language giving the FERC jurisdiction over licensing of LNG plants. President Bush signed the bill into law in early August.

FERC on October 7 released a draft environmental impact statement for the project prepared by staff finding that the companies' proposal would satisfy federal and state environmental requirement. The next hurdle for the project is a final environmental impact report from the commission.

Eddie said that Mitsubishi had signaled to buy 1-4 million tons per annum of Indonesian LNG to be supplied to Long Beach.

Eddie added that if deal were clinched, LNG supply for Mitsubishi would be sourced from Bontang LNG plant in East Kalimantan, which will have vacant capacity of around 12 MTPA after 2010 due to contracts expiry with Japanese buyers.

?My estimate is Japan buyers would only be willing to renew contracts of 6 MTPA, so we would have 6 MTPA of free capacity to sell,? he said.

Indonesia and Japanese LNG buyers had been locked in negotiations for year to renew the would-be expired contract. But Japanese buyers said they would only renew the whole contracts if they were given the same low price as Chinese buyer CNOOC Limited gets from BP-operated Tangguh LNG, a proposal Indonesia vehemently rejected.

He declined to comment on pricing saying it was still too early to say. He also decline to say when the contract would be sealed. ?That would depend on whether Mitsubishi can secure final permit to build the facility,? he said.(godang)