Govt team proposes three options for Tangguh gas sales

A special team established by the government has proposed three options in dealing the guarantee requested by the overseas buyers of the Tangguh gas project in Papua, Koran Tempo reported on Monday.

The chairman of BPMIGAS, Rachmat Sudibyo, said in Jakarta on Saturday that the recommendations had been submitted to the related government agencies but he did not elaborate.

According to him, the team comprises of senior officials from BPMIGAS, the office of the Coordinating Minister for Economy, the Ministry of Finance, and the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources.

In the first option, the team feels that the government does not need to explicitly state the guarantee in the principles of agreements with the buyers because such a kind of guarantee does not exist in the existing LNG contracts with the overseas buyers. "However, it does not mean that the government or BPMIGAS has no obligation at all."

In the second option, the team considers that the guarantee could be explicitly stated in the contracts but it will be valid only in force majeure situation, while in the third option, the team sees that the guarantee is stated explicitly in the contract and the government will be responsible except in certain cases.

The options are expected to settle the controversies related to the guarantee request. In their proposal, the overseas buyers demand the government to pay a compensation of up to US$300 million if there is an interruption in the LNG supply resulting from the issuance of new government regulations (acts).

Observers and oil and gas experts, however, oppose the guarantee proposal, because it could cause a big financial loss to the government. (*)