Tangguh LNG price will be negotiated again in 2018
Wednesday, July 2 2014 - 02:12 AM WIB
The newly agreed price of LNG from Tangguh plant in West Papua exported to China?s Fujian Province will be negotiated again in 2018 as the existing contract allows for price renegotiation in every four years, according to Minister of Energy and Mineral Resources Jero Wacik.
?We hope the price can be higher than the current level,? Jero told reporters on Tuesday.
Following lengthy negotiation talks, China National Offshore Oil Corporation (CNOOC) finally agreed late last month to increase the price of LNG from Tangguh to US$8 per mmbtu from $3.3 per mmbtu.
Under the first contract signed during the previous administration of president Megawati Soekarnoputri, the price of LNG was linked to the Japan Crude Cocktail (JCC) and the JCC was capped at $26 per barrel. It was later revised upward to $36 per barrel. During the recent renegotiation talks, CNOOC has agreed to remove the ceiling price.
As such, if the JCC price is $100 barrel, the price of LNG is set at $8 per mmbtu. Should the JCC price rise to $110 per barrel, the LNG price will increase to $8.65 per mmbtu.
Jero said that the formula used to determine the price of Tangguh LNG for Fujian this year according to the new contract is as follow: 0.065 JCC+1.5 for 2014. Meanwhile, for 2015, the formula changes 0.09 JCC+1.3, and then to change again in 2016 to 0.105 JCC+1.5, and to become 0.11 JCC+2.3 in 2017.
?Assuming JCC of $100 per barrel, then the price of LNG for Fujian will increase to $8 per mmbtu in 2014, and then increases to $10.3 in 2015, $12 in 2016, and $13.3 in 2017,? Jero explained.
He added that the price in 2018 will use the formula in 2017, and to be applied until the end of the contract in 2034. But the price can still change after 2018 depending on the result of renegotiation.
Elsewhere, Jero said that the government was still renegotiating the price of LNG from Tagguh for South Korea. ?It?s almost completed, we?ll announce it within the next two weeks,? he said.
Editing by Reiner Simanjuntak