Indonesia to export 25m tons of LNG to Japan under contract extension

Indonesia will export a total of 25 million tons of liquefied natural gas (LNG) over a period of 10 years to a group of Japanese buyers, known as Western Buyers, under the contract extensions recently agreed upon by both parties.

Iin Arifin Takhyan, Vice President of state owned oil and company PT Pertamina, told a hearing with the House of Representatives? Commission VII which oversees among others energy affairs on Monday that under the contract extension deal , Indonesia would export 3 million tons of LNG to the Western Buyers per year in the first five years and the volume would be reduced to 2 million tons per year in the subsequent 5 years.

Under the existing contracts with the Western Buyers that expire in 2011, Indonesia is obliged to ship 12 million tons of LNG per year. In a deal clinched last week in Tokyo, Indonesia and the Western Buyers agreed to extend the contracts until 2021.

Under the contract extension deal, the Japanese buyers will pay US$16 per MMBTU (million British thermal unit) FOB for the LNG if the crude price stands at $100 per barrel. The price will go up and down along with the fluctuation of crude price.

Indonesia?s LNG exports to the Japanese buyers have consistently declined over the past several years as the country?s production had been decreasing due to the decline in gas reserves.

According to Iin, Indonesia?s LNG exports to the Japanese buyers experienced a total shortfall of 72 cargoes from 1978 through 2007.

?The Japanese buyers have agreed not to claim the shortfall. Thus, we don?t have any obligation to (cover the shortfall),? Iin said. (Bernard)