Government denies selling Tangguh LNG at lower prices

Minister of Mines and Energy Purnomo Yusgiantoro has denied accusation that Indonesia will sell its liquefied natural gas (LNG) to China?s province of Fujian far lower than those offered by other countries, Neraca reported on Tuesday.

According to Purnomo, the price offered by Indonesia is as competitive as those offered by other LNG producers. "The price is competitive enough and there is no fire price involved in the deal to sell LNG to China," he was quoted as saying.

The minister acknowledged that there was misunderstanding about the price of the LNG to be sold to the Chinese province because there was no explanation about the details of the pricing in the contract, which was signed in Jakarta recently.

Under the contract, Indonesia will sell about 2.5 million tons of LNG to Fujian province a year for 25 years. The price is set at US$2.4 per MBTU in the contract, which is worth about US$8.5 billion. The gas will be supplied from BP Indonesia?s Tangguh gas project in Papua.

Purnomo said that the price seemed to be lower than those set in the contract secured by Australia to sell its LNG to Chinese province of Guangdong because there was no explanation whether it was FoB (free on board) or CIF (cost insurance freight).

According to him, the price set for the LNG supply to Fujian is FOB or not including transportation costs. He said he was sure that the FOB price of LNG to be sold by Australia would be also below US$3 per MMBTU. (*)