Kyushu has yet to take 4 cargoes from Bontang due to L/C requirement

By Febry Silaban & Godang Sitompul

Japanese firm Kyushu Electric Power Co. Inc. has not been able to take four spot-market cargoes of LNG from the Bontang LNG plant in East Kalimantan due to the obligation to use letter of credit (L/C) payment system.

?Kyushu has placed an order with Pertamina (state owned firm) for four spot-market cargoes of LNG from Bontang plant. Currently, discussion is ongoing whether Kyushu will have pay using L/C or not,? an industry source told Petromindo.com.

The source hinted that the LNG price is above US$7 per mmbtu.

Earlier this portal reported that Pertamina has managed to sell 10.5 uncommitted cargoes (of totally 22 uncommitted cargoes this year) of LNG from the Bontang LNG plant on spot market overseas.

The L/C policy was introduced by the Ministry of Trade several months ago through a ministerial decree effective April 1, 2015. Under the L/C policy, buyers of Indonesian natural resources abroad have to open L/C accounts in banks of their respective countries. The payment is made through the L/C account. This will add costs to buyers.

Oil and gas players have protested the application of the rule in oil and gas exports and the ministry has reportedly agreed to exclude oil and gas exports from the L/C requirement. However, as indicated by the case above, a confusion remains whether the government has officially exempted the oil and gas exports from the L/C requirement

Pertamina?s VP of LNG Commerce Didik Sasongko confirmed to Petromindo. Com a Japanese Western buyer is complaining about the L/C requirement.

The buyer insists that if it is required to use L/C system to pay for the LNG, Pertamina has to cover the L/C costs, Didik said.

?Discussion is still ongoing between seller and buyer. The issue is: Can Indonesia (Pertamina) cover the buyer?s L/C costs? If it can, how will it do it administratively?? Didik said.

Editing by Johannes Simbolon