Indonesia submits new LNG proposal to Japan?s Western Buyers
Friday, November 26 2004 - 02:05 AM WIB
?Indonesia through Pertamina has submitted new proposal with competitive price, better terms and conditions and far greater flexibility in terms of volume and destination to Western Buyers mid-November,? BPMIGAS deputy chairman in charge of Indonesian LNG marketing Eddie Poerwanto told Petromindo.Com Thursday.
Eddie said the latest proposal submitted well reflected world LNG trend, which is becoming increasingly becoming buyers? market and also taking into consideration Japan?s LNG users' business environment, which is becoming more deregulated and therefore more competitive.
Western Buyers include Chubu Electric, Osaka Gas, Kansai Electric, Tokyo Gas, Nippon Steel, Toho Gas and Nippon Gas.
Eddie hoped that talks with Western Buyers to discuss the proposal could commence as early as January next year.
Indonesia had been trying to secure extension of 12MTPA LNG contract from Western Buyers, which will expire in 2010. All the contracts are with Bontang LNG plant in East Kalimantan.
Under the fair and equal treatment deal signed in 2002, Western Buyers had committed to extend at least half of the contract volume in exchange of price reduction the group gets from Bontang. Western Buyers got price cut after the group protested cheaper contract prices Bontang LNG gave for Eastern Buyers for smaller volume contract. Eastern Buyers is grouping of utility firms, which consist of Tohoku Electric and Tokyo Electric..
Bontang gas suppliers; Total E&P, Vico and Unocal together with BPMIGAS and Pertamina had been trying to press Western Buyers to commit to contract extension of at least 6MTPA, but thus far, the group had not shown sign of rushing to get the contract signed.
A representative of Tokyo Gas Tsunenori Tokumoto, which was interviewed by Petromindo.Com on a sideline of Japan-Indonesia Energy Round table in Jakarta said that Western Buyers are considering Bontang contract extension very important, and therefore, he said, it need to be very careful to evaluate every aspect before getting into negotiation.
?As Indonesia is top supplier to Japan, Indonesian LNG contracts will be used as benchmark for other contracts from other suppliers. We have to be very careful about that because it would affect the industry as a whole,? he said.
He further said that changing business environment which tend to be more competitive after Japan deregulating utilities industries has forced Japan LNG users to put more emphasis on price competitiveness in order to survive.
Aside from price, Japan LNG buyers would need flexibility in terms of destination flexibility, take or pay relaxation and stable price mechanism.
In order for utility players to survive in today?s competitive environment in Japan, industry players need to mitigate unnecessary risks,? he said.
He also said that beside the above factor, security of supply remained high on Japan?s industry players? priority.
Indonesia is the world?s top LNG exporter, supplying LNG to South Korea, Japan and Taiwan from Arun LNG plants in Aceh and Bontang LNG. A third LNG center, BP-operated Tangguh LNg is scheduled to commence production in 2007. (alex)