Fujian LNG contract renegotiation in progress

By Godang Sitompul

Negotiations to review the price of Tangguh LNG for China?s Fujian terminal are in progress and BP Indonesia, the subsidiary of British firm BP Plc, which leads the Tangguh LNG plant consortium reiterated its wish that the new price will reflect the market price.

?Fujian price review negotiations are ongoing. We have stated in the past and remain clear that BP wants the LNG price to reflect the market price,? William Lin, BP Regional President for Asia Pacific, told Petromindo.com on Wednesday.

Some industrial players have spread a rumor that BP is reluctant to renegotiate the Fujian price as it favors the North West Shelf LNG plant in Australia, where it has a stake, to become the main supplier to China.

The rumor is unreasonable since at present the selling price of Tangguh LNG to Fujian is higher than the selling price of NWS LNG to China?s Guangdong LNG terminal. In 2006, Indonesia, thanks to former Vice President Jusuf Kalla, managed to push the Chinese government to raise the ceiling oil reference price (also known as capping) for Tangguh LNG to US$36 from the level of $25 per barrel agreed upon when the contract was signed in 2002. Meanwhile, the NWS consortium still sells its LNG at the 2002 capping of $25 per barrel since the Australian government under former Prime Minister John Howard refused to help the consortium renegotiate the contract?s price.

Howard was famously quoted by the Australian media as saying: ?Australians honor their commitment.?

Widhyawan Prawiraatmadja, Deputy of Commercial Control at upstream authority SKK Migas also dismissed the rumor.

?I think it is a false rumor. Negotiations take time. For BP, the faster the better, since they can use the result (of the negotiation) to renegotiate the NWS price,? he said

Editing by Johannes Simbolon