Indonesia may change LNG contract with Japan to provide more gas at home

As Indonesia continues to suffer from a shortage of liquefied natural gas, the government said on Friday that an existing contract to supply LNG from East Kalimantan to Japanese buyers would likely be revised to enable more fuel to be allocated to the domestic market.

Energy Minister Darwin Zahedy Saleh said the government may alter the contract to provide Japanese buyers LNG from the Bontang LNG plant in East Kalimantan .

?We?re able to revise the contract supply since the gas is our resource,? Darwin said. He acknowledged the possibility of penalties from buyers if Indonesia failed to meet its agreement, but he asked for understanding from Japanese companies. ?We?re still considering it.?

The LNG contract from Bontang was signed on Feb. 13, 2009 between operators PT Pertamina, Total EP Indonesia and Inpex Corporation and six Japanese buyers: Chubu Electric Power; Kansai Electric Power Co.; Kyushu Electric Power; Nippon Steel; Osaka Gas and Toho Gas.

The agreement covers a 10-year period starting in 2011. For the first five years, three million tons a year would be allocated to the Japanese buyers with two million tons a year allocated for the second five years. Currently, Japanese buyers are taking 12 million tons a year from Bontang.

Raden Priyono, head of upstream oil and gas regulator BPMigas, said as the amount of Bontang gas exported to Japan would be lower next year, there would be excess output of 2.5 million tons.

?The gas will be allocated to the domestic market, but if the infrastructure is not ready, we will have to find another buyer,? Priyono said.

State owned gas distributor PT Perusahaan Gas Negara (PGN)has several times warned that it was unable to fullly meet the demand for gas on the domestic market because the demand continues to increase, while gas reserves in Sumatra and Java have declined. It plans to build LNG terminal to get LNG from Kalimantan and Papua to meet the demand of its customers.

Currently, it?s estimated Indonesia is suffering from a 2.5 billion standard cubic feet of gas a day deficit. (Godang)