LNG sale extension to Japan up to the government: Pertamina
Monday, November 20 2006 - 10:54 AM WIB
Thus far, however, the government?s officials have not apparently reached an agreement whether to continue selling to the provinces? gas to Japan in the form of LNG or sell the gas to the domestic market.
?It is for the government to decide whether to extent the LNG sales contracts with the Japanese buyers,? Iin Arifin Takhyan, vice president of Pertamina, said.
Pertamina is the agency appointed by the government to handle the marketing of Indonesian gas to overseas buyers.
Iin made the statement following a report that a team of officials representing Japan?s government and six companies left for Indonesia on Monday to talk with the country?s government and Pertamina on an extension of the LNG sales contracts with the six companies.
The consortium of six companies, that is Kansai Electric, Osaka Gas Co., Chubu Electric Power Co., Kyushu Electric Co., Toho Gas Co. and Nippon Steel Corp., has two contracts with Pertamina for the supply of 12 million tons per annum (MTPA) of LNG from East Kalimantan?s Bontang LNG plant that are due in 2010 and 2011.
Quoting an official of Kansai Electric, Dow Jones reported that the consortium and Pertamina verbally reached a preliminary agreement in September last year to renew the contracts to supply a total of 6 MTPA - half of the current contracted volumes - after 2010 and 2011.
The negotiation finally stalled over price (the Japanese buyers asked Pertamina to cut the LNG price to the level offered by the Tangguh LNG plant to Chinese buyers) and the government?s announcement that it would use the gas to supply the growing domestic demand. The government has even awarded the contract to local firm Bakrie & Brothers to build a pipeline to transmit gas from the province to Java.
Japan has sent several delegations to Indonesia to push Pertamina to sign the extension of the 6 MTPA contract.
Officials at both Pertamina and upstream oil and gas authority BP Migas said on Monday that they were not aware about the visit of the Japanese delegation.
?I haven?t heard a Japanese delegation is coming to Indonesia. What I have heard is our president (Susilo Bambang Yudhoyono) will go to Japan,? BP Migas deputy head for gas marketing Edi Purwanto said.
An official at the agency said that Japanese officials had often made unannounced visits to the agency and Pertamina to talk about the extension of the LNG contract. ?What we always said is ?It?s up to the government to decide on the matter?,? the official who wanted to remain anonymous said.
The government initially looked determined to use the East Kalimantan gas for the domestic market with no less than President Susilo Bambang Yudhoyono repeatedly making statement on the new policy. However, Susilo has apparently changed his mind as he recently indicated that the government could extend the contracts with the Japanese buyers while Minister of Energy and Mineral Resources Purnomo Yusgiantoro indicated he preferred the construction of an LNG terminal in East Java to the construction of a pipeline linking East Kalimantan to the region. The minister further said gas from the Cepu block on the border of Central and East Java, that is still in exploration phase, would be used to add gas supply on the island.
However, Vice President Yusuf Kalla recently said he wanted the planned East Kalimantan-East Java pipeline project to go ahead.
Meanwhile, Pertamina has said that the maximum amount of LNG that the Japanese buyers would get under renewed contracts is 4 MTPA. Meanwhile, in documents seen by Petromindo.Com, Total and Chevron, the East Kalimantan gas producers that supply gas to the Bontang LNG plant, have stated their capability to supply gas equal to 6 MTPA of LNG.
President Susilo is planning a four-day visit to Japan Nov. 26-29, where he is expected to sign an economic cooperation accord, which analysts say the commitment from Indonesia to guaranteeing LNG supply to the country. (Godang/Bodega)