Gas price renegotiation with China rescheduled to early 2013
Tuesday, December 25 2012 - 02:39 AM WIB
Interim upstream authority SK MIGAS confirmed that the renegotiation of the sale price of the liquefied natural gas (LNG) from Tangguh plant in West Papua to Fujian in China has been rescheduled to early next year.
?The renogiation of the Tangguh LNG price had been rescheduled to early next year. The renegotiation team currently however is continuing with the preparations for the price renegotiation,? SK MIGAS Deputy Chairman Y.Widjanarko told Petromindo.com in Jakarta on Monday.
Widjanarko did not give any further details about the next year renegotiation plan.
But a reliable source told Petromindo.com that considering the declining trend of gas prices at the international market, it seemed that SK MIGAS had to be cautious about the renegotiation plan.
"It has to be careful about the gas price. It is predicted to be declining,? the source said.
It was previously planned that a team from Indonesia?s upstream oil and gas authority BPMIGAS - now interim upstream authority SK MIGAS - was scheduled to fly to Fujian, China, in the second week of November this year to renegotiate for a higher selling price of LNG produced by the BP-operated Tangguh LNG project in West Papua.
Meanwhile, Energy and Mineral Resources Minister Jero Wacik hoped that the renegotiation team would succeed.
?We?ll renegotiate (the LNG contract) with Fujian,? Jero said, adding that China has insisted on the current contract which is valid until 2029. ?But the contract says there?s opportunity for price renegotiation ? That?s why I will fight in Fujian,? he said.
The price of LNG from Tangguh project sold to Fujian, China, was based on Japan Coctail Crude (JCC) oil price.
Initially, the gas price was based on JCC oil price upper limit of US$25 per barrel, which was at US$2.4 per MMBTU.
In 2006, the JCC oil price upper limit was at $38 per barrel and the gas price was adjusted to $3.35 per MMBTU, which remains until now.
The gas price is considered far too low, prompting the government to renegotiate the gas price.
Editing by Benget Besalicto Tnb.