Funding for Tangguh LNG project remains uncertain: BP Migas

The funding for the development of the Liquefied Natural Gas (LNG) project in Papua remains uncertain because the government's efforts to obtain loans from Japanese Bank for International Cooperation (JBIC), the Asian Development Bank (ADB) or Bank of China have yet to show positive results, Kompas reported on Saturday.

"The funding for the Tangguh LNG project faces uncertainty, because it is not clear yet whether or not we will be able to get the funding from JBIC, ADB or Bank of China," Kardaya Warnika, the head of the regulatory body for the oil and gas upstream industry BP Migas, said in Jakarta on Friday.

BP Migas said earlier that he was optimistic that the funding for the US$3.4 billion LNG project could be settled in November, last year. Kardaya, however, said that the difficulties to get the funding from these international financiers would not affect the development of the LNG project, because the operator BP Indonesia had agreed to find the bridging funds to cope with the funding shortfall.

BP Indonesia holds 37.16 percent interest in the Tangguh LNG project, located in Bintuni, Papua. The remaining shares are owned by its partners including CNOOC Ltd, MI Berau BV, Nippon Oil Exploration Berau, KG Companies and LNG Corporation of Japan.

The LNG plant will have two LNG processing units, each with a combined capacity of 14 trillion cubic feet. The construction of the project has been 25 percent completed. Several foreign buyers have signed a long-term contract to buy from LNG from the Tangguh LNG plant. China's Fujian province will buy 2.6 million tons of LNG a year, Posco of South Korea about 0.55 million tons a year, K Power of the United States about 0.6 million tons a year, and Sempra Energy Corp of U.S. about 3.7 million tons a year. All purchases are under contracts of up to 20 years.

The government estimates that the LNG project will be able to generate export earnings of up to US$6.2 billion in 20 years. (*)