Japan still needs Donggi Senoro LNG very much

A high governmental ranking official from Japan told reporters Monday that the world?s largest LNG (liquefied natural gas) buyer still expects to get LNG supply from the much-debated Donggi Senoro project in Central Sulawesi, Jakarta Post reported Tuesday.

?The project is very much important for both sides [Indonesia and Japan ] and yes [we still hope to get LNG supply from the project],? Takayuki Ueda, Japan?s Director General for Natural resources and energy said on the side lines of the 10th Indonesian-Japan Round Table in Jakarta.

Ueda added that he was optimistic about the project?s LNG market prospects even though Kansai Electric Power C. Inc. had dropped its plan to buy LNG from the project. ?The project needs to find another customer, but since the project is very fruitful, I hope many companies would like to joint in this project,? said Ueda, adding that he still expected the project to be on schedule despite the protracted ongoing negotiations.

The Donggi-Senoro LNG plants is prepared to produce LNG from natural gas from Senoro and Matindok gas field in Central Sulawesi. Japan intends to play a big role in the project as Mitsubishi Corporation holds a controlling 51 percent share in PT Donggi Senoro LNG, a joint venture prepared to operate the LNG plant. State oil and gas company PT Pertamina holds as a 29 percent participating stake in the venture, while PT Medco Energy International holds the remaining 20 percent.

Japan had planned to play a significant role in project financing as the Japan Bank for International Cooperation (JBIC) was prepared to be the majority lender both for the upstream and downstream sides of the project, requiring about US$3.4 billion. But this was on the basis that the LNG would be exported to Japan to supply Japanese power companies.

The joint venture firm had therefore signed initial agreements for gas sales with two of Japan?s leading power companies: Kansai and Chubu Power Co.Inc. Under the agreement, each company would have been supplied with 1 million tons of LNG per years, starting from 2012.

But, the LNG project has been in limbo since at the end of the tenure of the last cabinet, the outgoing government, led by former Vice President Jusuf Kalla, decided the natural gas from the two blocks should go to the domestic market . The government decision led Japan?s Kansai Electric Power Co. to drop its plan to buy LNG from the project. (*)