BPMIGAS threatens to terminate LNG supply talks with Japanese buyers

Upstream oil, gas authority BPMIGAS said Indonesia might cancel LNG sales deal from Badak NGL in East Kalimantan to a group of Japanese buyers if both seller and buyers fail to reach agreement over several crucial issues.

?If negotiation stalls, we might be looking for other buyer(s) or we might sell the LNG to domestic market,? Deputy Chairman Budi Indianto told reporters on Wednesday. He did not give details if Indonesia has approached other potential buyers.

Indonesia and Mahakam PSC operator Total E&P Indonesie are currently negotiating an extension of the contract to supply LNG from PT Badak NGL in East Kalimantan, popularly known as Bontang LNG, to a group of Japanese buyers .

In February 2009, Mahakam PSC operator Total E&P Indonesie and its partner Inpex Corp. signed the Heads of Agreement (HoA) for the extension of LNG sales to a group of six Japan LNG buyers known as Western Buyers.

Under the deal, Mahakam PSC partnership through Bontang LNG will supply 25 million tons of LNG for 10 years starting 2011.

However, the negotiation to seal a final deal has been stalled for months as Western Buyers insisted that Indonesian government grant contract extension to Mahakam PSC and the whole LNG volume be sourced only from Bontang LNG. Mahakam PSC contract expires in 2017. But thus far, the government has yet make a decision whether to grant a contract extension to Total as state oil and gas company Pertamina has made clear its intention to take over 51 percent interest in the block after 2017.

?No one can force the government to grant PSC contract as the government has its own consideration. Moreover we want the contract volume to Western Buyers could also be supplied from other source ,? he said.

?BPMIGAS will give Western Buyers until February or March next year to make decision,? he said without further elaborating. (godang)