Govt finally issues decision on Donggi-Senoro LNG project

After more than two years of delays, the Energy and Mineral Resources Ministry finally issued its decision on Thursday on the future of the Donggi-Senoro LNG project in Central Sulawesi.

In the Energy and Mineral Resource Minister?s decree No, 4186/13/MEM M/2010, which was signed on 17 June 2010, the developers of the Donggi-Senoro gas field are required to sell between 25 and 30 percent of the LNG production to the domestic market.

Pertamina and PT Medco Energi Internasional plan to build a liquefied natural gas (LNG) plant in Central Sulawesi in cooperation with Japanese company Mitsubishi Corp. Gas for the proposed 2MTPA LNG plant will be supplied from Matindok-Donggi Block, which is operated by state-owned oil and gas firm Pertamina, and Senoro-Toili Block, which is jointly operated by Pertamina and Medco.

Pertamina, Medco and Mitsubishi have set up PT Donggi Senoro LNG, a joint venture company that will develop and operate the LNG plant. Pertamina has a 29 percent stake in the joint venture, while Medco has 20 percent, and Mitsubishi, as the majority shareholder, holds the balance.

A bulk part of the LNG to be produced from the plant will be exported to Japan and South Korea.

In August last year, Kansai Electric Power Co. Inc. of Japan terminated its agreement to buy the LNG, saying that the contract terms could not be fulfilled according to their expectation.

Following Kansai's pullout, currently there are three overseas buyers of the LNG, namely Chubu Power Co. and Kyushu Electric Power of Japan, and Korea Gas Corporation (Kogas).

Chubu has agreed to buy 1 million tons of LNG per annum (MTPA) from the plant for 12 years, while Kyushu and Kogas were expected to buy, respectively, 0.3 MTPA and 0.7 MTPA for 15 years.

In early June statement, Medco said the first shipment of LNG was expected to be done as early as 2014. ?After the government approves the gas sales agreement, we will work hard to finish the formulation of the final investment decision [FID] within six weeks to meet the target to deliver the first shipment in early 2014,? Medco project director Lukman Mahfoedz said on June 5, 2010.(godang/bernard)