Indonesia may cut LNG price to Japan

Indonesia, the world's biggest exporter of liquefied natural gas, said it will probably cut the price at which it sells the fuel to Japanese buyers.

Competition from Australian and Qatari suppliers is forcing the cuts, Purnomo Yusgiantoro, Indonesia's minister of energy and mineral resources, was quoted by Bloomberg as saying in an interview in Tokyo.

``We are fully aware that the market structure is shifting from the sellers' market to the buyers' market,'' Purnomo said. ``The market is tough.'' Indonesia also may offer more flexible terms for supply contracts, he said, without elaborating.

Indonesia is facing competition in selling its natural gas as Malaysia, Australia, Qatar and Oman boost output to supply Japan, South Korea and Taiwan, Asia's biggest LNG buyers. The increase in supply is reducing prices for the fuel used in power plants and in households for cooking and heating.

Purnomo said the price Indonesia offers to Japan will be linked to the price of crude oil. Prices to Japan ``have to be higher than domestic prices,'' he said, without giving a specific figure.

Indonesian producers sell gas to fertilizer plants at $1.50 to $1.85 per million British thermal units and at about $2.50 per million British thermal units to state utility PT Perusahaan Listrik Negara.

China earlier this year agreed to buy LNG from an Indonesian project led by BP Plc at a price of $2.40 per million British thermal units. The price, set in a formula linked to the price of crude oil, was based on an assumed oil price of $20 a barrel. It excluded shipping, which could add about 30 cents to 40 cents per million British thermal units.

Mitsui & Co. on Dec. 2 said it bought a 10.7 percent stake in the Tangguh LNG project, giving Japanese companies, the world's biggest LNG buyers, half of the venture in the Indonesian province of Papua. (*)