Indonesian LNG remains competitive: Purnomo

Despite emergence of new producers and stiff competition, Indonesian LNG would remain competitive and is ready to compete with other producers,? Minister of Energy and Mineral Resources Purnomo Yusgiantoro said.

?World LNG market is changing from what it was several years ago. The competition becoming stiffer and the market is increasingly dictated by buyers. But despite all that I?m confident that Indonesia will continue to excel as world?s leading LNG producer,? Purnomo told reporters late Wednesday.

Purnomo said Indonesia?s competitiveness edge was evident from lower price offered when bidding to supply LNG to Taiwan in 2003. ?Indonesia actually offered lower price than Qatar?s Ras Gas, but they finally got the contract due to other non-price sweetener,? said Purnomo.

Indonesia?s dominance in LNG market is increasingly threatened by existing producers which seek to expand capacity such as Qatar, Australia?s NorthWestShelf LNG, and Malaysia, as well as new producers such as Australia?s Gorgon LNG and Sunrise LNG projects, all are aiming at Asia Pacific and US market.

Indonesia is expecting another LNG center, Tangguh, in Papua, to come onstream in 2007 with initial capacity of 7 million tons per annum, replacing Aceh?s Arun LNG, which output is steadily declining due to gas reserves depletion. Tangguh had bagged 2.6 MTPA LNG supply contract to the Chinese province of Fujian and another 1.1 MTPA to South Korean firms SK Corp. and Posco. Tangguh will also partly supply some 3 MTPA of LNG to Sempra Energy?s planned receiving terminal in Baja California, Mexico.

Purnomo said Indonesia would push for more LNG sales to China and west coast of USA as he predicted demand in those two regions would increase significantly in the future. ?China will be major LNG consumer with strong growth. We are going to tap the market,? he said. Indonesia is currently pushing to sell LNG to Jiangshu and Shandong provinces. ?Marketing LNG to China is an art, as, opposed to US market, it was not fully determined by commerciality or Business-to-Business factor. Government-to-Government relationship and lobbies play a very important part to win an LNG contract in China,? said Purnomo. Purnomo is scheduled to visit China next month to push for more LNG sales.

Purnomo is also confident that more sales can be clinched in the future to west coast USA and Mexico. ? LNG demand in west coast of USA is huge and solely determined by pricing factor. Current benchmark price called SOCAL now is standing at around US$7 per MMBTU. The price is expected to remain strong in the future. With $1 per MMBTU transport cost from Indonesia to west coast, there?s still plenty of room for Indonesia to make sales,? said Purnomo.

Industry sources said that the cutoff price for Indonesian LNG to west coast is around $4 per MMBTU CIF.

Purnomo also expressed his confidence that contracts with Japanese buyers, which will expire in 2010, can be expanded. ?As long as we keep up with the market trend,? I?m sure that they will continue to buy LNG from Indonesia, as we have proved to them that Indonesia is a reliable LNG supplier within the past 20 years,? he said. Some 12 million MTPA of LNG contract with Japanese buyers will expire in 2010. Purnomo earlier said that the good old days when Indonesia can clinch higher LNG prices to Japan are over. ?We have to accommodate market condition which dictates lower price, shorter contract and greater flexibility,? he said.

Indonesia is currently the world?s number one LNG exporter. (alex)