Govt approves Tangguh deal revision

The government had approved of the revision of the gas sales agreement (GSA) between Chinese oil firm CNOOC Ltd and BP Plc over LNG supplies from the Tangguh project in Papua, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Tuesday.

Under the revised deal, the BP-led consortium that owns the project will potentially get larger revenue from the sales of Tangguh LNG to China.

?The price (of LNG sold to CNOOC) will be higher than the domestic gas price,? Purnomo said, without elaborating.

Industry sources said the revised deal set the oil ceiling price at US$38 per barrel, compared with US$25 per barrel in the original agreement signed by CNOOC and BP in 2002. Indonesia sells its gas at prices fluctuating in accordance with crude price. If crude price increases, the price of the gas also rises and vice versa. Crude price hovered above $70 over the past several months.

Purnomo said another point in the revised agreement was that Bank of China would provide a payment guarantee for the supply of Tangguh LNG.

The revised agreement also allows CNOOC to divert the Tangguh LNG supplies provided that the Chinese firm pays a premium price and gets approval from the Tangguh consortium.

Under the original deal, CNOO will buy the LNG to meet the demand of Fujian province.

Purnomo said the government expected the revised agreement to be signed soon. (Alex)