Govt asks LNG buyers to set new price soon
Saturday, July 19 2008 - 01:55 AM WIB
Kardaya Warnika, a spokesman for the government's LNG price renegotiation team, said in Jakarta Friday that the government had given the buyers until early December 2008 to decide on new prices.
"We shall not allow the exports of the fuel until the buyers make decision on the new prices," Kardaya said.
He said the Ministry of Energy and Mineral Resources was preparing a ministerial decree on gas prices for domestic and export markets. Under the decree, the export price of gas should be higher than the selling price on the domestic market. The lowest export price will be referred as the ceiling price for domestic market.
The government has formed a team to renegotiate the prices of LNG from the Tangguh plant which is being developed by a consortium led by British firm BP Plc. Under the contracts with buyers, the price of LNG from Tangguh will fluctuate in line with movement in oil prices. However, there is a limit on how much the gas price can increase since the contracts set a ceiling price of oil as reference.
Under the initial contract with Chinese firm CNOOC, for instance, the ceiling price of oil was set at US$25 per barrel. After renegotiation, CNOOC agreed to raise the ceiling price to $38 per barrel. Still, it is much lower than the current market price of around $135 per barrel.
Aside from CNOOC, the Tangguh LNG plant has also signed sales and purchase agreements with Mexico's Sempra, South Korea's SK Corp and Posco and Japan's Tohoku Electric. (*)