RI and four other LNG producers plan joint supply scheme

Indonesia, Qatar and three other countries producing liquefied natural gas (LNG) are planning to supply one another with LNG to improve their competitive edge in the global marketplace and strengthen their hand in price negotiations with gas buyers from Japan and other nations, Indonesia's minister of energy and mineral resources said in a recent interview with the Nihon Keizai Shimbun that was published in its Thursday evening edition.

The countries thereby aim to boost their competitiveness against gas fields in Sakhalin in Far East Russia and elsewhere, the business daily reported.

Malaysia, Brunei and Oman will also join the scheme.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro, who serves as the chairman of the Organization of Petroleum Exporting Countries (OPEC), has promoted the scheme and secured an agreement from the participating countries. The scheme is to be inaugurated formally in 2005 after further specifics are worked out, the report said.

Algeria and Iran might also participate.

The five countries' annual LNG output totaled 3.1 trillion cu. feet in 2002, accounting for just under 80% of Japan's LNG imports and 60% of world production.

LNG is purchased mostly under long-term contracts extending 20 years or so because use of gas requires costly investment in storage and other production facilities. So an ability to ensure a steady supply is as important as prices to enhance the competitive edge of producing nations.

Under the planned scheme, if one of the five participating countries' gas fields become exhausted or the country becomes unable to deliver gas due to accidents, labor disputes or other reasons, the five countries will convene a ministerial level meeting to ship needed gas on behalf of the country in trouble and fulfill orders in accordance with the contracts.

The five countries will consider setting up a body to operate the scheme, but for the moment Indonesia will take charge of coordination. The group intends to take advantage of the joint arrangement to boost sales to the U.S., China and India, besides Japan, South Korea and Taiwan, which have been longtime customers.

The new system will not seek to coordinate production among the participating countries or prop up prices as OPEC does, said the Indonesian energy minister.(*)