Indonesia may not extend LNG supply accord with Japan

Indonesia, the world?s largest liquefied natural gas (LNG) gas seller, may not extend a contract to sell the fuel to Japan after 2010 because it wants the LNG for domestic use, Bloomberg reported on Wednesday.

Indonesia, which sells 44 percent of its annual gas production in the country, has a contract to sell 12 million metric tons a year of LNG to a group of Japanese buyers from the PT Badak NGL in Bontang, Indonesian part of Borneo. The country may prefer to divert Bontang?s output to local users from customers abroad if the plant is fully paid for, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said.

?We are now calculating the remaining debt owed by the Bontang okant by 2010, because the project should refinance itself,? Purnomo told reporters in Jakarta on Wednesday.

The government may have less need to sell LNG from Bontang to customers abroad if the debt is covered, helping it pursue a drive for increased use of domestic gas over imported oil to power its utilities and cut the country?s budget deficit.

?We want to prioritize gas for domestic users,? Purnomo said. ?We?re now calculating the supply and demand situation in the domestic market,? he said.

Indonesia earlier planned to halve LNG sales to 6 million tons to the buyers after the existing contracts expired in 2010.

The Bontang plant lowered the volume on offer to the Japanese group because of falling supply from gas fields that supply the plant and government plans to channel some gas to supply the main island of Java.

Indonesian President Susilo Bambang Yudhoyono on Tuesday signed a decree prioritizing gas output for domestic use , Purnomo said.

The government will allow companies with ?big? gas reserves to exports parts of their gas output while producers with ?small to medium? reserves will be required to sell to the domestic market, Purnomo said. (*)