Indonesia may offer less than 6MTPA LNG contract extension to Japan

State oil and gas company PT. Pertamina said on Friday that Bontang LNG might not be able to supply the whole 6 MTPA LNG contract extension which it is currently negotiating with a group of Japanese buyers due to lack of proven gas reserves in East Kalimantan.

?Japanese buyers insist on having 6 MTPA contract, but thus far, there is no firm commitment from East Kalimantan gas producers that they would be able to produce gas of that volume,? said Pertamina director Arie Sumarno. He did not rule out the possibility that both parties may end up in signing less than 6MTPA LNG supply contract extension.

Some 12 million MTPA of Bontang LNG contracts will expire in 2010. Pertamina is authorized by the government to hold talks to extend 6 MTPA contract with Japanese buyers.

He did not say specifically the volume of LNG that can be sold to Japanese buyers, but a BPMIGAS official said that currently East Kalimantan gas producers Chevron and Total can only contribute 2 MTPA and 3 MTPA, respectively, leaving Pertamina 1 MTPA short. The official said that Chevron could only committed to supply 2 MTPA because the company is currently in the process of reassessing their East Kalimantan gas portfolio reserves. Other Bontang gas supplier VICO Indonesia will not able to participate in te contract extension due to reserves depletion.

A Petromindo source, however, said that the 1MTPA shortage may came from Central Sulawesi Senoro Toili block, where a 1.7 MTPA LNG plant is being planned and slated to commence operations in 2008. The source said that talks were on going between related parties on the possibility the LNG project supplying 1MTPA of LNG in one package with Bontang LNG contract extension.

Eddie Poerwanto, BPMIGAS deputy chairman in charge of LNG marketing, however, said that the final say from Indonesian side would only came after the government made final say about the volume of Bontang LNG that can be exported. ?If the government decides to only allow less than 6MTPA LNG export from Bontang, then we will tell that to our Japanese customers and it would be up to them whether or not to accept the offer,? he said. The government is currently launching a drive to halt or at least reduce gas export in favor of domestic gas supply. The government?s plan to cut LNG export has created uneasiness on the side of gas producers, as LNG export price is usually much higher than domestic gas prices. (godang)