Govt agrees to allocate some E. Kalimantan LNG capacity to domestic use

The government has approved the plan to allocate some of the production capacity of East Kalimantan's Bontang LNG plant for domestic use after 2010, when the plant?s contracts with some buyers expire.

?The government has okayed the plan to allocate an equivalent of around three million ton per annum (MTPA) of LNG MTPA to cater domestic need. It will be delivered either through Kalimantan-Java pipeline or in the from of LNG to PLN?s proposed LNG receiving terminal,? Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday.

Bontang's LNG plant will see its contracts with Japan?s buyers with a total volume of 12 MTPA expire in 2010, and it has expected the buyers to renew contracts for around 6 MTPA of supply. A number of interested buyers including companies from Japan, Thailand, India and US has been approaching Indonesia for the possibility to buy Bontang?s future spare LNG volume, BPMIGAS chairman Kardaya Warnika said recently.

Indonesia has planned to build a pipeline linking East Kalimantan to Java, which will transport some 1 BCFD of gas from East Kalimantan to the industrial island. The government is preparing the bidding for the the construction of the pipeline despite doubts about the project?s feasibility. Opponents of the project has said that it would be too costly to build a 1,200 km pipeline and the price of well head gas should be very cheap to make the gas competitive in Java, a thing that East Kalimantan gas producers might not accept as they are currently enjoying high international prices for their gas.

State electricity firm PLN has also planned to build a 3-MTPA LNG receiving and re-gasification facilities in Java, with EPC winners scheduled to be announced next month. So far, PLN has not secured any LNG supply contract but it calimed to have received a number of proposals from foreign suppliers.

Eddie Widiono, PLN?s president said PLN is ready to buy Bontang?s LNG provided that it was given special price. ?We cannot be expect to by LNG at US$7 per MMBTU. We want special price,? he said on Thursday. He did not specify the price of LNG PLN was seeking but he hinted that PLN?s average gas prices should not exceed US$3.5 per MMBTU. (godang)