Indonesia to clinch two US LNG deals : Report

Indonesia will finalize terms to supply liquefied natural gas (LNG) to a Mexican terminal by July, and is working on another deal to ship LNG to a planned California plant, an executive from Indonesia's upstream oil and gas regulator was quoted by Reuters on Monday.

Djoko Harsono, head of marketing for the Indonesian government agency BPMIGAS, said the contract to supply LNG to a Mexican terminal planned by Sempra Energy and Shell could set a floor and ceiling price for the fuel, and offer both sides the option of diverting cargoes to other locations.

"Our target is the first of July at the latest," Harsono told journalists on the sidelines of an energy conference.

The 20-year contract calls for BP Plc to deliver 500 million cubic feet of LNG per day produced from the Tangguh field to the Ensenada terminal in Baja California beginning in 2007. No financial details of the contract have been released, but sources close to the deal have said it could be worth $700 million a year in revenue to the seller.

BPMIGAS is also negotiating a contract with Mitsubushi Corp. to supply LNG to a terminal planned for Long Beach, California, near Los Angeles, Harsono said.

"We are going to sign a (memorandum of understanding). The target is the end of December," he said.

Three dozen LNG terminals have been proposed for construction in the United States to meet expected shortfalls in natural gas supplies in the coming years, although experts believe only a handful of those import facilities will be built.

The Sempra/Shell plant in Baja California, Mexico, will link to pipelines along the U.S.-Mexico border. Construction on that project is expected to begin this year, with operations starting in 2007.

The one billion cubic feet per day terminal proposed by Mitsubishi unit Sound Energy Solutions in California must still be approved by federal and local authorities.

Indonesia, the world's number one LNG exporter, must sign definitive supply deals to secure about $3 billion in financing needed to develop the Tangguh field and the plant needed to cool the gas into liquid form so it can be transported by tankers, according to Harsono.

However, Indonesia could easily divert the LNG to feed growing Chinese demand, he said, although the higher prices in the United States make it a more attractive market.(*)