Japan signs trade deal with Indonesia amid gas concerns

Indonesia said Tuesday it will keep up vital gas exports to Japan but needed more investment as it signed the framework for a free trade deal that will also let in more Indonesian workers, AFP reported.

Indonesia is the biggest supplier of liquefied natural gas (LNG) to Japan, which lacks sufficient energy resources of its own and has been alarmed at reports that Jakarta will slash its exports to meet growing domestic demand.

"Japan and Indonesia agreed on the framework of the cooperation pact," Japanese Prime Minister Shinzo Abe said at a joint press conference with visiting Indonesian President Susilo Bambang Yudhoyono.

While the deal remained largely vague in detail, Yudhoyono said he hoped for a quick conclusion of working-level talks.

"I hope that before the end of 2007 we will already be implementing that agreement," Yudhoyono earlier told business leaders in Tokyo.

Japan, the world?s second-largest economy, has increasingly sought bilateral free trade agreements, particularly in Southeast Asia, following the breakdown of global trade liberalization negotiations.

In a first, the framework deal with Indonesia explicitly mentions energy security.

Abe 'expressed strong concern over the stable supply of LNG and President Yudhoyono showed substantial understanding,' a joint statement said.

"Regarding the sales of LNG, I want to stress that I respect contracts with Japan," Yudhoyono said in the press conference. "I want to continue bilateral cooperation in this area after contracts with Japan expire."

"I want to continue cooperating to increase the production of petroleum gas, which of course includes LNG, to satisfy domestic demands while supplying resources overseas," he said.

Indonesia provided 24 percent of Japan?s total LNG imports in 2005, with neighboring Malaysia close behind at 23 percent.

Six Japanese firms are negotiating the renewal of LNG trade contracts with Pertamina, which had indicated it would reduce exports to Japan from 2010 to meet rising domestic demand.

Japan also said it will increase technical assistance to Indonesia in areas such as coal to-liquid technology and energy-saving measures. It promised cooperation to help Jakarta safely introduce nuclear energy.(*)