Tangguh’s gas sale to U.S. may not be profitable to Indonesia

The sale of liquefied natural gas (LNG) from Tangguh project in Papua to Sempra Energy LNG Corp. in California has the potential to inflict losses to the state. Though the gas price under Henry Hub formula may be higher, but the government’s income will certainly be dropped due to the high transport costs, Koran Tempo newspaper reported in its Thursday edition.

This was revealed by former secretary-general at the Ministry of Mines and Energy Umar Said in his paper presented at a seminar on gas as an alternative to gasoline organized by Koran Tempo recently in Jakarta.

In his paper, Umar cited energy consultant R.W. Beck, who said that the calculation of netback of the gas price from California to Tangguh shows that Indonesia will get only small portion from the value of the gas in the field.

The main reason for this was the components of the gas price like transportation costs and pipeline rent would not be enjoyed by the Indonesian side. If the price as per Henry Hub formula is fixed at US$3.75 per million British thermal units (MMBTU), the gas, which is inside the field, price will be just $0.50 per MMBTU.

“How pity is that the exporting country like Indonesia’s natural resource is priced $0.50 per MMBTU,” Umar said, adding that Indonesia will suffer losses. (*)