Purnomo says no price discount for existing LNG contracts

Government signals that it would not grant LNG buyers? requests to cut down prices on existing contracts in line with market trend.

?Cutting prices for existing contracts is not likely, even if its is followed with contract extension. But for new contracts, Indonesia is ready to compete according to market price,? said Minister of Energy and Mineral Resources Purnomo Yusgiantoro in an interview late Wednesday.

A number of Japan LNG buyers commonly referred to as ?Western Buyers? had asked for LNG price cut for their existing contracts citing ?too high price? as reason.

Meanwhile, Pertamina president Baihaki Hakim said Thursday that talks with Japan LNG buyers had been ?favorable? although no firm commitment had been reached. Baihaki said one of the main concerns of Japanese buyers was security of supply.

LNG buyers had indicated that they will use prices of Tangguh LNG and NorthWestShelf LNG to China, which reflects roughly 25 percent discount of average price Japan buyers have to pay, as benchmark price for new contract negotiation.

Muchsin Bahar, Pertamina downstream indicated that Indonesia will be willing to lower down prices for new contracts, but said won?t be willing to sell as low as Tangguh.

?Tangguh badly needs buyers to justify its development. That?s why the selling price is so low. But it had created market distortion and cut-throat competition among producers. We would not like to see that happen again,? he said.

Indonesia is currently the world?s largest LNG exporter but her dominance has been threatened by several factors such as the emergence of new producers, losing market confidence as reliable LNG producers and lack of aggressive marketing efforts. (godang)