Indonesia may resume LNG talks with Japan
Thursday, October 19 2006 - 02:44 AM WIB
The source said that Indonesia had been pressurized by Japanese side to resume talks on contract extension from Bontang LNG plant in East Kalimantan. Some 12 MTPA of LNG contract to Japan will expire in 2010-2011, and Japan is scrambling to get contract extension amid tight supply market.
?SBY is will likely bow on Japanese pressure as Japanese side would make LNG supply as one of condition for possible free trade agreement for the two countries,? the source, a high ranking government official who is deeply involved in Indonesian LNG management said.
Indonesia and Japan concluded the round of talks in Tokyo earlier this month. Tokyo and Jakarta plan to include in the agreement a deal that Indonesia will ensure a stable energy supply to Japan when the two countries reach an outline of a bilateral free trade agreement late November, Kyodo News agency reported earlier, citing unidentified Japanese officials.
Officials say that the two countries hope to reach an agreement in principle in November, when SBY is expected to visit Japan for talks with Prime Minister Shinzo Abe. The date for Yudhoyono's visit has not yet been revealed.
Indonesian leaders including SBY and Vice President Jusuf Kalla had earlier repeatedly said that East Kalimantan gas would be supplied to domestic market and asked Japan to find LNG suppliers somewhere else. Indonesia is planning to bring East Kalimantan gas reserves to Java via 1,200 km pipeline. If the plan could be realized, there would not be enough gas left in East Kalimantan for LNG contract extension with Japanese buyers.
A company controlled by powerful minister cum tycoon Aburizal Bakrie had won right to develop the pipeline.
However, early this week, SBY seemed to change his mind by saying that the government would review reconsider plan to build the pipeline as Cepu area in East Java may have enough gas to supply customers in Java.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro, though decline to confirm cancellation of Kalimantan to Java pipeline project, said that Pertamina might have some 4 TCF of gas reserves in its Cepu operations area and Pertamina and Exxon JV has some 1.7 TCF in Cepu oil and gas block.
Purnomo also declined to confirm whether government would decide to resume LNG contract extension talks with Japan.
?All this factors might lead to SBY to give green light to Indonesia to resume LNG contract extension negotiation with Japan,? the source said.
BPMIGAS Chairman Kardaya Warnika said that so far, the talks with Japanese side (for LNG contract extension) had been stopped, pending clear direction from the government. ?If it is true that the government would allow negotiation to be resumed, then BPMIGAS would propose for negotiation for new contracts instead of renewal, with new terms and conditions,? he said on Wednesday. He also said that the volume of the LNG contracted would be based solely on the availability of uncontracted gas reserves in East Kalimantan.
Currently there are three gas suppliers to Bontang LNG plant. French giant Total SA with partner Inpex, currently produce 2.6BCFD, Vico Indonesia with production of 500MMCFD and Chevron with less than 20MMCFD production. Most of gas produced is supplied to Bontang LNG plant.
Gas supply from Vico and Chevron had been dwindling sharply in recent years, causing Bontang LNG to cut shipments to its East Asian buyers.
Total had earlier said that it would have adequate gas reserves to service for 3MTPA of new contract beyond 2010. Chevron had also reiterated that it would be comfortable to supply 3 MTPA from its offshore gas reserves, which was slated to come on stream within the next five years. (alex/godang)