SKK Migas outlines Tangguh LNG supply deal to Kansai

By Alexander Ginting

BP-operated Tangguh LNG has signed a 10-year deal to supply LNG to Japan?s electricity firm Kansai Electric Power starting 2014, an official with upstream oil and gas authority SKK Migas told Petromindo.com on Friday.

Senior Manager for Communications and Protocol Zudaldi Rafdi said that under the deal, Kansai will get 4 cargoes a year until 2017 and 8 cargoes of LNG a year from 2018 until 2022. Rafdi said the LNG will be sourced from cargoes originally dedicated for US Sempra Energy.

In 2023, when Tangguh?s third train facility is scheduled to start operation, Kansai will get 16 cargoes of LNG or roughly equivalent to 1 million tons.

Rafdi said Kansai?s contract for LNG supply from the Tangguh third train can be extendable to beyond 2023.

According to Rafdi, Tangguh LNG and Sempra have agreed to totally stop LNG export to North America starting 2014, and will divert the whole contract volume to export market in Asia as well as to domestic market. ?Tangguh LNG can sell the LNG to Asia market at much higher price than supplying the LNG to North America,? he said without disclosing details about pricing.

Sources said that in 2014, Tangguh will get US$14.5 per BBTU from Kansai under the agreed pricing formula, which is far higher than the current price in North America, a market which is flooded by shale gas supply. Tangguh will have to pay Sempra $1 per BBTU for the diversion.

Under the original contract, Tangguh LNG was allowed to divert only up to 50 percent of the annual volume by paying fee of US$1/mmbtu to Sempra.

Tangguh LNG has a long-term contract to sell 3.7 MTPA of LNG to Sempra.

Rafdi added that talks are ongoing to also divert part of the LNG volume originally dedicated for Sempra to customers such as Tokyo Electric Power Company (Tepco) and Korea Gas Corp, as well as to domestic consumers. He did not give further details.

Tangguh LNG currently has two trains with total capacity of 7.6 MTPA. Another train with a capacity of 3.8 MTPA is currently being planned. Officials said that 40 percent of the third train capacity will be allocated to the domestic market.

Editing by Reiner Simanjuntak