Indonesia considers to cut LNG prices for Korea, Japan: Purnomo

Indonesia, the world's top liquefied natural gas exporter, said it may cut prices for buyers such as Japan and South Korea after China agreed to buy the fuel from Australia at a quarter less than market prices, Bloomberg reported Friday.

Although Indonesia hasn't yet decided, ``sometimes you pull, you give,'' Purnomo Yusgiantoro, Indonesia's energy minister, said in an interview. ``All the gas producers are under pressure because now the market structure is such that it is a buyer's market. There are so many suppliers now.''

Indonesia wants to renew supply contracts that run out as soon as 2007 and avoid losing customers to Australia and other rivals such as Malaysia, Qatar, Oman and Russia that are building new plants or expanding existing facilities.

Pertamina, Indonesia's state oil company, also needs to sign up customers for a $2.2 billion plant that BP Plc plans to build. Officials of the state company last month marketed BP's venture in Japan, which spent 1.5 trillion yen ($12.6 billion) on LNG last year.

Indonesia ships more than 23 million tons of LNG a year to power plants and other customers, mostly in Japan, South Korea and Taiwan. The state oil company has an 8.4 million ton contract with Japan that expires in 2010. Pertamina also has a contract for 2.3 million tons a year with South Korea, which is due to end in 2007.

LNG is natural gas that's been chilled into liquid form so it can be transported on a ship over distances that are too far for a pipeline. Buyers transform LNG back into gas so that it can be piped to power stations, factories and households.

Discounts

Japanese and South Korean buyers are seeking discounts from other suppliers after China won the largest LNG price cut in the industry's three-decade history last year, to Guangdong province in the south.

China will pay a quarter less than Japanese buyers, who consume almost three-fifths of global output. China's price was fixed at about $3 per million British thermal units, while Japanese buyers pay about $4, Katsuhiko Suetsugu, secretary general of the Asia Pacific Energy Forum, a research group, said last month.

Indonesia is seeking customers for the $2.2 billion Tangguh project off West Papua, led by BP Plc. BP has just one confirmed buyer, China, and needs more to make the venture feasible. Other than Japan and Korea, the Philippines and Taiwan are being targeted as potential customers, Purnomo said.

Indonesia currently exports LNG from PT Badak NGL at Bontang, the world's biggest LNG producer, which is supplied with natural gas from the Tunu gas field operated by Total Fina Elf SA. PT Arun NGL, which gets gas from the Arun field operated by Exxon Mobil Corp., is the smaller of Indonesia's two producers. Pertamina also hopes to develop a fourth plant at the Donggi gas field in Sulawesi.

Korea

Among the new contracts Pertamina will contest is one to supply as much as 1.1 million tons of LNG under a one-year contract to South Korea's Posco, the world's second-largest steelmaker, and SK Corp., the country's top oil refiner. They will close a tender on March 26 to buy the fuel.

Last year, Malaysia cut the price of LNG to be supplied to Tokyo Electric Power Corp. and Tokyo Gas Co. under a 15-year contract.(*)