Pertamina-Medco given until February to settle C. Sulawesi LNG prices
Pertamina-Medco offered to build LNG plant by themselves
Saturday, January 26 2008 - 02:22 AM WIB
"If there is no decision made through the end of February, Pertamina-Medco should seek for other alternative (for the development of the project),? Deputy Head for Financial and Marketing Affairs Eddy Purwanto said in Jakarta Friday.
The alternative is that Pertamina and Medco build the LNG plant by themselves, Eddy said.
"Pertamina and Medco can build the LNG plant by themselves. In order to get the cheapest price, they can carry out a tender. If the construction costs of the LNG plant can be pressed down, the price of gas for the plant can be increased," Eddy said.
BPMIGAS and the Ministry of Energy and Mineral Resources' Directorate General of Oil and Gas have to set the price for the gas from Senoro and Matindok fields at US$3.85 per MMBTU.
Howevever, sources said Japanese firm Mitsubishi Corp, the partner of Pertamina and Medco in the LNG plant, has asked for a decrease in the price of the gas in order to cut the investment costs.
?Rising costs has soared investment estimate from US$300-400 per ton to US$800 per ton,? a source who is involed in the project told Petromindo.com in December 2007. That means the investment costs could soar from below $1 billion to $1.6 billion.
?This factor has slowed down Mitsubishi in making investment decision, and has prompted Mitsubishi to ask for lower gas price from Pertamina and Medco,? the source said.
The Donggi-Senoro LNG plant will be jointly built by Mitsubishi, Pertamina and Medco E&P, with the Japanese firm having 51 percent, and Pertamina and Medco 29 percent and 20 percent respectively. Aside from the largest shareholder, Mitsubishi will also act as the seller of the LNG to Japanese buyers.
Under the deal signed on December 19, 2007, all parties signed shareholder agreement, in which they agreed to establish PT Donggi Senoro LNG (DSLNG) to operate the LNG plant. They also agreed that the LNG project shall be structured as a downstream business project and be separated from the upstream business.
DSNLG will handle all activities related to the LNG project, including studies, financing, design, engineering, development, construction, commissioning. DSLNG will also handle the marketing and delivery of the LNG to be produced from the plant.
Gas for the project will be sourced from Pertamina?s 100 percent-owned Donggi block and Senoro-Toili block, which is equally owned by Pertamina and MedcoEnergi. Both blocks have combined certified reserves of 3.7 trillion cubic feet. (Bernard)