Indonesia sets minimum price for LNG export to Mexico

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said Indonesia is only willing to sell its LNG to Mexico for at least US$4 per million British thermal unit (MMBTU) CIF and was optimistic that the price would be accepted by buyers as North America?s gas market price is hovering around $5 per MMBTU.

?Setting price below $4 per MMBTU only mean to sell the LNG at par with domestic gas price, that would be unacceptable for us. In that case, it?s better for us to sell our gas domestically,? Purnomo Yusgiantoro told reporters.

Purnomo, however, did not say the benchmark price used in negotiation to determine LNG price to Mexico. All LNG contracts are tied with benchmark price, usually crude price and fluctuates overtime according to the said crude basket price fluctuation. LNG price from Tangguh to Fujian, for example, is set to follow fluctuation of Japan Crude Cocktail Price.

Indonesia is in intense negotiations with US oil companies Marathon Oil and Sempra Energy to sell around 5-6 million tons per annum (MTPA) of Indonesian LNG to Mexico and west coast of the USA starting 2008. Both companies are planning to construct LNG receiving terminals and facilities in Mexico.

Purnomo admitted one of the main hurdles for negotiation is pricing. ?But I am optimistic that deal can be reached by the end of this year, as we have reached agreement about the volume.?

President Megawati Soekarnoputri had also lobbied president Vincente Fox of Mexico to make way for realization of LNG sales to Mexico during APEC meeting in Bangkok last week.

LNG to Mexico will be supplied from Bontang LNG in East Kalimantan, Tangguh LNG in Papua, and possibly from Pertamina?s Donggi gas field in Central Sulawesi. (godang)