JBIC signs loans for Donggi-Senoro project

By Romel S. Gurky

The Japan Bank for International Cooperation (JBIC) signed two loan agreements totaling up to US$58.8 million and $254.9 million (both denote JBIC portions), respectively, with Mitsubishi Corporation (MC) for the Donggi-Senoro LNG project in Central Sulawesi.

The loans are co-financed with private financial institutions, the bank said in a statement recently.

These loans provide MC with funds required for MC to develop upstream natural gas fields and construct and operate the LNG plant with an annual production of 2 million tons jointly with Korea Gas Corporation, PT. Pertamina (Persero), the state oil company of Indonesia, and PT. Medco Energi Internasional Tbk.

In the aftermath of the Great East Japan Earthquake, the Japanese energy environment has become increasingly hard. In particular, it is an important policy issue for Japan to secure a stable supply of LNG, which, at present, accounts for more than 40 percent of the composition of its power sources. Thus the "New Strategic Energy Plan" decided by the cabinet in April 2014, advocates the diversification of LNG supply sources.

Although Indonesia used to be the largest LNG exporter to Japan until the first half of the 2000s, import volume from the country has been decreasing in recent years and is expected to continue to decrease in the future. Given this prospect, Japanese electric power companies plan to take delivery of more than 60 percent (1.3 million tons per year) of LNG produced in this project. Thus JBIC's support for this project will contribute to diversify the supply sources of LNG and securing its stable supply for Japan.

As Japan's policy-based financial institution, JBIC will continue to support Japanese companies for promoting the development and acquisition of energy resources, by drawing on its various financial facilities and schemes for structuring projects, and performing its risk-assuming function.

Editing by Johannes Simbolon