Japanese firms seek LNG extension
Wednesday, January 25 2006 - 01:08 AM WIB
Several Japanese businessmen from the influential Japanese Chamber of Commerce and Industry (Nippon Keidanren) raised the issue of the extension of contracts during a breakfast meeting here Tuesday with visiting Vice President Jusuf Kalla.
The Indonesian government has announced a new policy to prioritize the gas supply for the domestic market.
?The Vice President responded that the government of Indonesia would guarantee the existing contracts by supplying LNG to Japan until they expire,? chairman of the Indonesian Chamber of Commerce and Industry (Kadin) M.S. Hidayat said after the meeting.
?However, the government is still considering what would happen next because of its policy to prioritize the domestic needs of gas in the future.?
The future of the LNG supply was also broached by Japanese investors and diplomats during a seminar Monday held by the Japan Institute for International Affairs (JIIA)
Japan?s energy needs are expected to increase with projected higher growth amid a continuing economic recovery.
Indonesia?s gas reserves of 188.34 trillion standard cubic feet are among the most extensive in the world. It has become one of the major LNG suppliers for the world?s second largest economy.
Indonesia has announced a plan to cut its LNG exports by 10 percent in 2006 due to lower production in aging gas fields in the provinces of Nanggroe Aceh Darussalam and East Kalimantan.
According to the Indonesian Upstream Oil and Gas Regulatory Agency (BP Migas), the country may only be able to offer as much as 6 million metric tons of LNG per year in the future, an amount barely enough to cover half of the volume set under the current contracts.
Future LNG contracts would also be affected if the government carries through with its plan to require gas producers to allocate at least 25 percent of their output for domestic market. The plan would only affect gas production sharing contracts made after 2001.
Hidayat later said the Indonesian contingent asked during the meeting for the Japanese to increase their investment to spur development in the country.
?We also want a guarantee from them (on investment),? Hidayat said.
In the effort to improve the investment climate, he said Jakarta promised to speed up the completion of flew laws affecting industry, such as tax reform, investment and labor.
Japanese investors, during a visit by President Susilo Bambang Yudhoyono last year, promised to more than double their investment in Indonesia, to about US$30 billion from the current $14 billion.
But Hidayat said the Japanese only wanted to realize the investment plan after a proposed Economic Partnership Agreement (EPA) between the two countries had been agreed upon.
EPA is a bilateral agreement aimed to boost trade, investment, technical assistance and other areas.
The third round of negotiations will be held in Jakarta next month. (*)