Govt's guarantee for Tangguh LNG project not necessary: Analysts

Non-governmental organization and a number of energy observers have asked the government to turn down the proposal to guarantee the future supply of liquefied natural gas (LNG) from the Tangguh gas project to overseas buyers, Kompas reported on Thursday.

The observers including Fabby Tumiwa, the coordinator of the Working Group on Power Sector Restructuring (WGSR), senior energy analyst Kurtubi, Ramses Hutapea and economist Dradjat Wibowo, said in a press meeting on Wednesday that the guarantee could cause a problem to the country's future financial condition.

In the press conference held by WGSR, Dradjat said that the guarantee would become a burden to the country's economy in the future. "With the guarantee, investors will free from risk but on the other side it will become a burden to the country's economy," he added.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro pledged recently that the government would guarantee the LNG supply from the Tangguh project to overseas buyers if the production sharing contract signed with the operator of the gas field would expire ahead of their export contracts.

There is growing concern from several overseas buyers that the LNG supply from the gas field will be stopped if the production sharing contract with the gas field's operator BP Indonesia is not extended.

The export agreements signed with several overseas buyers such as Posko of South Korea, Sempra of the United States and Fujian of China will expire in 2027, while the contract awarded to BP Indonesia to operate the gas field will end in 2017. (*)