Indonesia ready to offer lower LNG price to Kogas, but reluctant to give discount
Tuesday, June 22 2004 - 04:18 AM WIB
?Indonesia is ready to offer lower price than current contract price (to Kogas), but Indonesia will not reduce its price offer below what we consider is ?fair?,? said BP Migas chairman Rachmat Soedibjo. BP Migas is Indonesian upstream oil and gas watchdog.
2.3 million tons per annum (MTPA) of LNG supply contract from Arun LNG plant in Aceh will expire in 2007 and Indonesia is trying to get the contract extended. If Indonesia wins contract extension, the contract would be given either to Bontang LNG in East Kalimantan or Tangguh LNG in Papua, as Arun would not be able to continue to supply LNG due to dwindling gas reserves.
Kogas had earlier signaled it would seek LNG contract price similar to those offered by Tangguh to the Chinese province of Fujian, which is believed to be around US$ 2.6 per MMBTU. Current LNG price from Indonesia to Kogas ranges from $ 3.5 to $5 per MMBTU, depending on crude price.
Reports said that Kogas had been in contact with several LNG producers, which are also interested to get the LNG contract, including Australia?s NorthWest Shelf Venture and Ras Gas from Qatar.
Kogas is reportedly also seeking to lower down its current contract price with several producers and had given US$ 15 per ton or 6 percent discount from Brunei LNG. Brunei LNG had 16-year term contract to supply 700,000 TPA to Kogas. The contract will expire in 2014. Kogas is seeking price reduction amid steep crude price increase, which forces the company to pay around $ 5 per MMBTU currently, as LNG price is linked with crude price.
A Kogas official had earlier confirmed that it had also asked Indonesia to give discount. Aside from Indonesia, Kogas said it had also started similar talks with Malaysia and Middle east suppliers.
Rachmat said Indonesia would not give any buyer any discount unless the discount is linked with contract extension or new contract deal.? We understand that the current crude price makes buyers pay more, but unless there is a guarantee of contract extension, it?s hard for Indonesia to give any discount,? he added.
Indonesia is currently Kogas top LNG supplier, exporting 5.3 MTPA out of Kogas? 19 MTPA requirements. KOGAS imports 19.4 million tons of LNG every year under long term contracts with Indonesia, Malaysia, Brunei, Qatar, Oman and Australia. (godang)