Domestic market unable to absorb 14 LNG cargoes from Tangguh

By Febry Silaban

Ministry of Energy and Mineral Resources stated that there are 14 cargoes of LNG from the Tangguh LNG plant in West Papua which have been allocated for the domestic market but can?t be delivered due to the absence of buyers.

"BP (the operator of the Tangguh LNG plant) has sent a letter asking where the 14 LNG cargoes should be delivered to. If there is no one to buy the LNG, the worst consequence is they have to cut the production and shut down the wells. The best option is selling the LNG to the international market,? Director General of Oil and Gas IGN Wiratmaja said recently.

?This is a wakeup call for us that the development of gas infrastructures should be accelerated so that the LNG can be absorbed,? he said.

BP also in a letter asked the ministry for certainty regarding domestic demand for LNG from the third train it plans to build at the LNG plant. In the letter, BP said it is committed to providing any amount of LNG the domestic market wants from the Tangguh Train 3 and will export the rest. The firm, however, demands the gas sales and purchasing contracts be signed as soon as possible -- by March 2016 at the latest.

Upstream Director at ministry Djoko Siswanto said the ministry has told BP that it can export the output from Train 3 that has been allocated for the domestic market if the domestic market could not absorb it.

Train 3 is designed with a capacity of 3.8 mtpa, which will bring the total capacity of Tangguh LNG plant to 11.4 mtpa.

In October of last year, BP Indonesia reported that Tangguh Contractor Parties signed a sales and purchase agreement with state-owned electricity company PT Perusahaan Listrik Negara (PLN) (Persero) to supply up to 1.5 million tons of LNG a year for 19 years beginning in early 2015. In addition, BP has also secured commitment from a Japanese customer (Kansai Electric) of 1 mtpa from Train 3.

The government has expected to state-controlled gas distribution firm PT Perusahaan Gas Negara (PGN) Tbk and oil and gas firm PT Pertamina (Persero) to buy the output from Tangguh Train 3.

Editing by Johannes Simbolon