EXCLUSIVE: RI mulls establishing OPEC-like organization for LNG
Friday, November 10 2000 - 06:00 AM WIB
Indonesia is mulling establishing a cartel of liquefied natural gas (LNG) producers, resembling the Organization of Petroleum Exporting Countries (OPEC), to strengthen LNG producers' bargaining position in facing LNG buyers.
State oil and gas company Pertamina Baihaki Hakim said on Thursday during a meeting with the House of Representatives' Commission VIII, which oversees among others mines and energy affairs, that the idea of establishing the OPEC-like cartel surfaced in response to the stronger bargaining position enjoyed by LNG buyers amid the flood of LNG supplies on the global market.
He said in the past, buyers were not very demanding in negotiations with sellers because there were few suppliers on the market.
Today, he said, buyers were controlling the market because there were a huge of LNG supplies on the market.
"The current trend is that LNG producers are in control (of the market), which we did not see in the past. Buyers now set tight requirements, demanding scheme which allows them to renegotiate the price and volume of supplies anytime," Baihaki said.
Baihaki said Pertamina had discussed the market situation and the idea of establishing the OPEC-like organization with several LNG producers in the region.
"We have hold discussion with (Malaysian state oil and gas company) Petronas and Brunei," he said.
He did not however specify whether they had agreed with the idea of establishing the OPEC-like organization.
Indonesia is thus far the world's largest LNG exporter with an annual export of more than 30 million tons.
Indonesia controlled the regional market for decades, supplying LNG to South Korea, Japan and Taiwan but several new players, including gas-rich Qatar and Australia, are entering the regional market to take Pertamina's market shares.
Baihaki said Indonesia is facing tough competition especially with Qatar, which sells very cheap LNG.
"Qatar's LNG has a very low cost of production because the country has a huge gas resources?. We don't want to sell our LNG very cheaply because our gas resources are limited," Baihaki said. (Epin)