Contract extension for LNG exports to Japan to be signed this month

The government will sign later this month the extension of a contract to sell LNG from Badak NGL, popularly known as Bontang LNG in East Kalimantan, to a group of six Japanese LNG buyers, known as Western Buyers.

?The energy minister and the upstream oil and gas regulator BPMIGAS chief have approved the contract extension,? BPMIGAS deputy for operational support and marketing Budi Indianto said on Monday.

Indianto said the extended contract would stipulate new LNG price. ?The price is higher than in the old contract,? he said without giving further details.

The signing of the contract extension will not have to wait for the extension of Total E&P Indonesia?s production sharing contract (PSC) over the Mahakam gas block, as earlier demanded by the Japanese buyers, he added.

In November last year, BPMIGAS said that Indonesia might cancel LNG sales deal if both seller and buyers failed to reach agreement over several crucial issues.

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

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

However, the negotiation to seal a final deal had been stalled for months as Western Buyers insisted that the Indonesian government should first extend the contract awarded to Total to operate the Mahakam block before signing the deal.

Western Buyers also demanded that the LNG it would buy should be entirely supplied by Bontang LNG. The PSC contract on the operation of the Mahakam block will expire in 2017.

But thus far, the government has not yet made any decision whether or not it will renew the contract. State oil and gas company Pertamina has expressed its interest to take over a 51 percent interest in the block after the existing contract expires after 2017. (godang)