First shipment of Donggi-Senoro gas expected in early 2014

PT Medco Energi Internasional, a member of a consortium preparing the much-debated Donggi Senoro liquefied natural gas (LNG) plant, said the first shipment of LNG was expected to be done as early as 2014, The Jakarta Post reported on Saturday.

?After the government approves the gas sales agreement, we will work hard to finish the formulation of the final investment decision [FDI] within six weeks to meet the target to deliver the first shipment in early 2014,? Medco project director Lukman Mahfoedz said.

Medco holds a 20 percent participating stake in the US$3.7 billion project, while state oil and gas company PT Pertamina and Japan?s Mitsubishi Corporation hold 29 percent and 51 percent, respectively.

The initial target for the first LNG delivery was in 2013, but Lukman said ?Following the FID, we will need 42 months to construct the LNG plant,?.

The project delay is being blamed on the government?s indecision over the gas allocation from the Senoro and Matindok fields, the gas source for the LNG plant. Initially, the consortium planned to supply all the gas to the LNG plant, but the previous

Cabinet, led by then vice president Jusuf Kalla, decided that all the gas had to be sold to the domestic market. Following the decision, the government, the consortium and several domestic potential buyers became involved in protracted negotiations.

On Thursday, Vice President Boediono recommended allocating at least 25 percent of the gas to the domestic market. Lukman said the project developers were fine with this portion. ?We will allocate 25 percent to the domestic market as requested by the government,? he said.

Coordinating Economic Minister Hatta Rajasa gave slightly different figures for the gas allocation on Friday. ?The best option is 70 percent and 30 percent domestic market]? he said.

However, Energy and Mineral Resources Minister Darwin Zahedy Saleh, who is responsible for announcing the final decision, said the government was still studying the depth of the domestic market. Darwin said he initially expected to announce the decision on Tuesday next week, but that this could not be done as the he had to discuss the 2011 state budget with legislators.

Darwin did not specify when the announcement would be made, saying only that he expected to ?announce it as soon as possible?.

A previous delay to the project led Japan?s Kansai Electric Power Co. Inc. to terminate its agreement to buy LNG in August last year. Three other foreign buyers are still lining up to buy the LNG: Chubu Power Co. Inc., Kyushu Electric Power Company and Korea Gas Corporation (Kogas). (*)