Sri Mulyani to lead renegotiation team for Tangguh gas sales

President Susilo Bambang Yudhoyono will soon set up a special team to renegotiate the sales contract of liquefied natural gas (LNG) from the Tangguh LNG plant in West Papua to China.

Speaking in a plenary Cabinet meeting in Jakarta on Thursday, the President said that the team which would be led by Coordinating Minister for Economy Sri Mulyani Indrawati would seek for more realistic price and appropriate benchmark for the LNG to be sold to China?s province of Fujian.

He said that the coordinating minister would later name members of the team which would be under the supervision of Vice President Jusuf Kalla.

Sri Mulyani said that the team members which would comprise of senior officials with high integrity would be would be selected in coordination with related government offices.

The Vice President met Chinese leaders during a meeting in Beijing late last week to discuss economic cooperation including the possibility of renegotiating the LNG sales contract with the country.

Indonesia signed a contract in 2002 to supply China's Fujian province with 2.6 million tons per year of LNG from the Tangguh LNG plant for a period of 20 years starting next year.

Under the contract, the LNG price is pegged to the crude price. So the LNG price will rise and fall along with the fluctuation of the crude price. However, the 2002 contract capped the crude reference price at $25 per barrel. In 2006, China agreed to revise upwards the ceiling crude reference price to $38 per barrel -- still much lower than the market price. Crude has been traded above $100 per barrel since the beginning of the year and hit above $140 last month. (*)