Indonesia may delay Tangguh LNG shipments

The government may delay shipments from the Tangguh LNG project being developed by a consortium led by British energy firm BP Plc until it gets a higher price for the fuel, an upstream oil and gas watchdog BPMIGAS official said.

?We will negotiate with our buyers for prices that better reflect market rates,? Eddy Purwanto, BPMIGAS deputy of finance and marketing told reporters in Jakarta Wednesday. ?Our contracts stipulate penalties for delay. We would rather pay penalties than selling too low.?

?We don't want any ceiling price (for the LNG). We want to change the pricing formula to floating terms in relation with oil price,? he added.

The government has formed a negotiating team led by former Foreign Minister Ali Alatas, in a bid to intensify efforts to increase the price of LNG from Tangguh to China's province of Fujian. The team has held talks with the Chinese government but thus far the efforts had brought no results.

?We want the Chinese government understand the Tangguh LNG price should be improved amid soaring oil price. We realize a contract is a contract, but at the current state of oil price, it?s only fair for Indonesia to ask for(upward) price revision,? Purnomo said in May this year, adding that a clause in the contract witht the Chinese buyer also allowed Indonesia to ask for a price revision.

China's state-owned oil firm CNOOC signed a contract to import 2.6 MTPA of LNG from Tangguh for its Fujian receiving terminal in 2002. Under the contract, the Tanggung LNG price fluctuates in accordance with oil price, but the oil price was capped at US$25 per barrel. In 2006, CNOOC agreed to raise the ceiling price to to $38 per barrel. (godang)