Indonesia may offer smaller Bontang LNG volume, shorter contract to Japanese buyers

Indonesia would likely offer smaller volume of LNG and shorter time contract renewal to a number of Japanese LNG customers after 12 million tonnes per annum LNG contracts from Bontang LNG plant, East Kalimantan expire between 2010-12, a source said.

According to the source, who is deeply involved in supervising Indonesian LNG industry, Upstream Oil and Gas Authority BPMIGAS had advised Ministry of Energy and Mineral Resources that Indonesia to offer 3 million tonnes per annum extension for 2011-2015 period with possibility of 1MTPA extension in 2016-2020.

The source said that the volume was based on uncommitted reserves figure from Total E&P-operated Mahakam block, which is currently the biggest gas supplier to Bontang and appropriation of some of gas reserves to meet demand of East Kalimantan industrial users and possibility of supplying 2-3MTPA of LNG to the island of Java from 2011-2020.

?All of the available gas reserves are currently based on Mahakam block (reserves)alone, as gas fields development plan of other gas producer Chevron Corp. are still being reviewed, therefore (at this stage) is unsuitable to be offered to buyers,? the source said. The source, however, suggested that Chevron might be able to contribute to supply 1 MTPA to domestic market from 2013 and 2MTPA for export from 2014 to 1018.

Other Bontang supplier, VICO Indonesia, would not be able to supply gas beyond current contracts due to reserves decline, the source said.

To avoid supply shortage in the future and to secure gas supply for domestic use, the volume of Bontang LNG contract extension that could be offered to Japanese Western Buyers is 3 MTPA for 5 years with possibility to extend 1MTPA for another five years,? the source said.

Yasuhiro Yashima, fossil fuel executive officer of Japan?s energy firm The Kansai Electric Power Co Inc, said in the January 2007 interview in Jakarta that Western buyers are expecting to be able to extend at least 6MTPA of the LNG contracts. The consortium also known as ?Western Buyers? comprising Kansai Electric, Osaka Gas Co., Chubu Electric Power Co., Kyushu Electric Co., Toho Gas Co. and Nippon Steel Corp., has two contracts with Pertamina for the supply of 12 million tons per annum (MTPA) of LNG from the Bontang LNG plant that are due in 2010 and 2011.

The Japanese buyers are eager to seal LNG extension deal quickly as global LNG market had been constrained by supply, but are frustrated by lack of serious response from Indonesian side who adopts new policy of prioritizing domestic gas supply.

Eddie Purwanto, BPMIGAS Deputy Chairman in Charge of marketing, however, said that thus far, no formal talks about Bontang LNG contract had been made despite extensive meetings between Indonesia and Western Buyers. ?No decision yet on the supply volume that are being offered from Indonesian side. BPMIGAS is still waiting for government?s decision,? he said.(alex)