Protracted delays may cause more buyers to pull out from Donggi Senoro LNG

Protracted delays due to the government's indecisiveness will very likely make more buyers of liquefied natural gas (LNG) from Donggi-Senoro field to pull out from the deal.

?It'll be very difficult for buyers to explain to their management about the protracted delays of Donggi-Senoro project. They've run out of patience," state-owned oil and gas company PT Pertamina?s president director Karen Agustiawan said on Monday.

She added that another factor that might cause them to pull out was that they have got offers of long term LNG deal from Papua New Guinea, Australia, and Qatar.

Meanwhile, Pertamina?s director for upstream operations Bagus Setiardja said ?The three companies have given the government until next month to decide the fate of the LNG project.?

In August last year, Kansai Electric Power Co. Inc. of Japan terminated its agreement to buy the LNG, saying that the contract terms could not be fulfilled according to their expectation.

Following Kansai's pullout, currently there are three buyers of the LNG, namely Chubu Power Co. and Kyushu Electric Power of Japan, and Korea Gas Corporation (Kogas).

Chubu has agreed to buy 1 million tons of LNG per annum (MTPA) from the plant for 12 years, while Kyushu and Kogas were expected to buy, respectively, 0.3 MTPA and 0.7 MTPA for 15 years.

Pertamina, PT Medco Energy International, and Mitsubishi Corporation has set up PT Donggi Senoro LNG, a joint venture company that will develop and operate the LNG plant.

Pertamina has a 29 percent stake in the joint venture, while PT Medco Energi Internasional has 20 percent, and Japan ?s Mitsubishi Corporation, as the majority shareholder, holds the balance.

The LNG plant will process the natural gas from Matindok and Senoro fields in Central Sulawesi. But the government, since the era of former vice president Jusuf Kalla until now, has not yet decided whether the gas would be for export or mainly for domestic market in line with its regulation on domestic market obligation (DMO).

Although the government has indicated the gas for domestic need, Medco and Pertamina have seen their negotiations with three potential local buyers, state power producer PT PLN, state fertilizer producer Pupuk Sriwijaya and domestic ammonia producer Panca Amara Utama (PAU) to buy the LNG, protracted without any decisions.

Vice President Boediono is expected to make a decision on the gas development soon. "?We want the government to make its clear decision, whether the gas development for exports or for domestic market," she said. (godang)