Pertamina says C. Sulawesi gas price could fetch $10 per MMBTU

State oil and gas company Pertamina said it and Medco EP Indonesia has agreed with Japan?s firm Mitsubishi Corp. on pricing formula for gas supply for Donggi LNG plant in Central Sulawesi and the companies are awaiting approval from upstream watchdog BPMIGAS.

?Mitsubishi has agreed to buy gas at well head at a price linked to Japan Cocktail Crude, which, at US$100 per barrel, could reach $10 per MMBTU. We consider this a very good price,? Pertamina Vice President Director Iin Arifin Takhyan told Petromindo.Com on Monday.

Mitsubishi is planning to set up a 2MTPA LNG plant in Central Sulawesi in partnership with Pertamina and Medco, which hold minority interest. Gas for the proposed plant, will be supplied from Matindok Block, which is operated by Pertamina and Senoro-Toili Block, which is jointly operated by Pertamina and Medco. The LNG plant would be built separately by Mitsubishi as downstream plant, meaning that gas producers would sell gas to the LNG plant at well head.

Iin expressed disappointment over the lengthy process of approval, as he considered that the pricing formula is already favorable to gas producers and to the state. ?Lack of approval has caused delay to the project?s development,? he said.

Meanwhile, BPMIGAS Chairman R. Priyono told Petromindo.Com that price formula proposed for Matindok and Senoro-Toili gas has been close to BPMIGAS target. ?We want the price to be a little bit higher,? he said, without further elaborating. He added that another unresolved issue that delayed approval including the liability clause Mitsubishi proposed; in which government would be held liable in case the blocks fail to deliver gas to the LNG plant. ?The government cannot be held liable,? he said.

Medco EP President Loekman Mahfoedz said earlier that the LNG partnership will spend up to US$1.4 billion to develop the project. Mitsubishi is currently in talks to sell LNG from Donggi to Japan?s Kansai Electric Power and Tohoku Electric Power. (alex)