Pertamina says C. Sulawesi LNG talks progressing

State oil and gas company PT.Pertamina said talks with Japanese from Mitsubishi Corp. over plan to build an LNG plant in Central Sulawesi is currently progressing with some obstacles had been cleared.

Pertamina Deputy CEO Iin Arifin Takhyan said in a recent interview that currently Pertamina and Medco are negotiating floor price for the gas they would produce to feed the proposed LNG plant, which would be operated by Mitsubishi. ?We want guarantee to receive minimum price for our gas to justify upstream investment in Senoro Toili and Donggi blocks,? he said, adding that some issues regarding the plant?s construction costs had been settled.

He, however, would not say when negotiation is expected to be concluded.

Under the cooperation scheme, Mitsubishi will have 60 percent shares in the 2MTPA power plant, with Pertamina and Medco equally share the remaining 40 percent stake. The plant would receive gas from Pertamina-operated Donggi block and Pertamina-Medco-operated Senoro-Toili block. Pertamina and Medco would receive revenue based on actual LNG prices sold minus LNG plant?s costs and margin. Mitsubishi will also act as offtaker of Senoro LNG.

Donggi and Senoro-Toili blocks have combined proven reserves of 2.3 TCF.

Talks had earlier hit a snag as Mitsubishi insisted on using Japanese contractors to develop the project, while Pertamina and Medco wanted to employ national contractors to cut costs. Pertamina had threatened to give the project to other developer if Mitsubishi instead on its stance, which could cause the project costs to significantly soar above US$700 million.

A Pertamina high ranking official told Petromindo.Com on Wednesday that Mitsubishi had agreed to relax its insistence and would be willing to use national contractors for some part of the EPC works.

The LNG plant is slated to commence production 2009-10. (godang)