China, Indonesia have agreed on Tangguh LNG price: CNOOC

China and Indonesia have reached an agreement on the pricing of liquefied natural gas to be supplied to the southeastern province of Fujian from the Tangguh project and will announce details shortly, Chinese buyer CNOOC Ltd. said.

Terms of the accord will be unveiled at an energy forum the two nations plan to hold later this year, CNOOC Chairman Fu Chengyu said in an interview in Beijing, Tuesday.

CNOOC, China's largest offshore oil company, is helping to build terminals that receive LNG as the nation pursues a target to get 8 percent of its energy needs from natural gas by 2010.

The push will increase consumption of natural gas in the country, which currently uses coal to generate two-thirds of its power, The Jakarta Post reported on Thursday.

"Both sides will officially announce the details at an energy forum," Fu said. "It involves government officials and we're working out the timing."

The accord will advance development of BP Plc-led Tangguh, a project that may help Indonesia, the world's largest LNG seller, meet export commitments as falling reserves cut gas supplies to existing plants.

Higher crude-oil prices, rising demand and limited supply have pushed LNG prices up from all-time low levels in 2002, when China agreed to buy the fuel from Tangguh.

"The Henry Hub price is around US$6 to $7," per million British thermal unit, Fu said. "I think that will be a good indication" for future prices. Henry Hub price is the international benchmark for natural gas markets.

Indonesia's government last month approved an increase in the maximum oil price that BP Plc and partners may use in a formula to derive the price of LNG sales from the Tangguh project to CNOOC. The maximum assumed oil price will rise to $38 a barrel from $25 a barrel, Kardaya Warnika, chairman of state oil and gas upstream regulator, BPMigas , said on June 6.

"CNOOC in the past always paid market price," Fu said. "In the future I think we will still pay market price." (*)