Indonesia to honor LNG contract with Japan: Minister
Japan sets LNG contract extension as condition for economic cooperation
Tuesday, November 21 2006 - 03:19 AM WIB
Purnomo made the statement amid reports that a Japanese delegation comprising governmental officials and representatives of six companies that currently buy LNG from the Bontang LNG plant in East Kalimantan is heading to Indonesia to push Indonesia to extend their contracts.
The consortium of the six companies, that is Kansai Electric, Osaka Gas Co., Chubu Electric Power Co., Kyushu Electric Co., Toho Gas Co. and Nippon Steel Corp., has two contracts with Pertamina for the supply of 12 million tons per annum (MTPA) of LNG from the Bontang LNG plant that are due in 2010 and 2011.
?Why do we export the gas (from East Kalimantan)? If we stop the contracts now, that means we don?t honor the contract. Our policy is big-size gas is for exports, while small-size gas, such as Cepu?s gas, is for the domestic market.
?We have spared 4.5 trillion cubic feet (TCF) of gas reserves in Tangguh for the domestic market. We have asked BP to allocate the gas for the domestic market. But, thus far, no one is interested,? Purnomo said in a seminar on biofuel in Jakarta.
The consortium of six Japanese companies and Pertamina verbally reached a preliminary agreement in September last year to renew the contracts to supply a total of 6 MTPA - half of the current contracted volumes - after 2010 and 2011.
However, the negotiation finally stalled over price (the Japanese buyers asked Pertamina to cut the LNG price to the level offered by the Tangguh LNG plant to Chinese buyers) and the government?s announcement that it would use the gas to supply the growing domestic demand.
The government has even awarded the contract to local firm Bakrie & Brothers to build a pipeline to transmit gas from the province to Java.
Some governmental officials, including President Susilo Bambang Yudhoyono and Minister Purnomo, made statements recently indicating that the government might finally allow Pertamina to extend contracts with the six Japanese companies. However, Vice President Yusuf Kalla keeps insisting that the East Kalimantan-East Java pipeline project should continue.
President Susilo is planning a four-day visit to Japan Nov. 26-29, where he is expected to sign a bilateral economic partnership agreement (EPA).
A high-ranking official who is part of the Indonesian team for the negotiation with Japanese government on the EPA said on Tuesday that Japan?s Ministry of Economy, Trade and Industry (METI) has strongly insisted that the security of LNG supply from Indonesia to Japan is a prerequisite for the signing of the EPA.
?Japan is desperate to have the contracts extended. The EPA talk is on the brink of collapse unless Indonesia agrees to meet the prerequisite regarding the LNG supply.
?The government will decide whether to accept the requirement in two or three days before the president?s departure to Japan,? the official who wanted to remain anonymous told Petromindo.Com.
According to him, in return for Indonesia?s willingness to extend the LNG contracts, Japan will offer assistance to help Indonesia develop biofuel and coal liquefaction under the EPA. (Godang/Alex)