Indonesia ready to submit Kogas LNG supply tender

Indonesia hopes to secure at least 2.3 MTPA of LNG supply contract from South Korean gas distributor Kogas-or similar to current contract volume, which will expire in 2007- from the 5.3 MTPA supply tender that Kogas is currently opening, an official of Indonesian upstream oil, gas watchdog BP Migas said.

?We have received letter of invitation to participate in the tender from Kogas and we will respond in due time,? said BP Migas deputy-chairman in charge of gas marketing Eddie Poerwanto over the week-end.

Kogas had started seeking offers 5.3 MTPA of LNG supply for 20 years beginning 2008, part of which would replace the 2.3 MTPA Arun III and IV contracts from Arun LNG plant in Aceh which will expire in 2007.

A Kogas official earlier said that the company would send letters to existing long-term suppliers and new suppliers, including those in Sakhalin. Kogas expected to receive bids by September 20 and would choose more than one potential supplier by the end of September for serious talks. Kogas is reportedly seeking to cut LNG purchasing price by 40 percent.

Eddie hinted that Indonesia would lower LNG price offer. ?Otherwise, we would not be able to compete with other suppliers,? he said. However, he declined to comment whether Indonesia would offer 40 percent price discount.

Another BP Migas official said that Indonesia would offer dual sources for the Kogas supply tender. ?We will offer LNG from Bontang and Tangguh,? said Gas Marketing Division head Djoko Harsono on Monday.

In fact, added Djoko, Indonesia has the capacity to supply 5.3 MTPA after 2009. ?Bontang would have another spare capacity with expiration of some of current contracts and Tangguh?s next trains is slated to commence production in 2010,? said Djoko.

BP Migas has appointed state oil and gas company Pertamina as sole marketing agent to sell LNG to South Korea.

A Petromindo source said critical supply capacity problem would arise in 2008-2009, especially in Bontang. ?Bontang LNG is currently facing gas supply problems. Moreover, some of Arun?s LNG supply commitment would have to be swapped to Bontang to meet Aceh gas supply requirement. If East Kalimantan PSCs can not be coordinated to increase gas supply, then there will be problems to produce enough LNG for the new Korean contract,? said the source. The source said developing a new train in Bontang to meet the contract is not an option, as some of Bontang contracts would expire in 2010, leaving the plant with some 10 MTPA of excess capacity.

Tangguh LNG project, which is scheduled to commence production in 2007, had also been booked to up to 7 MTPA. (godang)