Tangguh LNG project will need $6 billion investments: Japanese firms

The BP Plc.-led Tangguh LNG project in Indonesia will need investments totalling $6.0 billion, BP's Japanese partners said on Monday, compared with market estimates of $5.0-$5.5 billion, the Investor Daily Indonesia newspaper reported on Tuesday quoting the Reuters.

The engineering, procurement and construction (EPC) contract for onshore work, signed in March, is worth $1.8 billion, said the partners that include Mitsubishi Corp. , INPEX Corp., Sumitomo Corp. and Kanematsu Corp. .

Tangguh, in Indonesia's remote Papua province, is slated to start production by end-2008. Its projected output capacity is equivalent to 6 percent of current world demand for liquefied natural gas (LNG).

The $6 billion investment includes the costs of related upstream developments, marine infrastructure to bring gas from an offshore field and two LNG trains, the Japanese firms said in joint statement.

Half of the funds will be sourced from the market, they said. Of that amount, about $1 billion is expected to come from Chinese syndicated loans and the rest from private banks and international lenders, they added.

The consortium also includes China's CNOOC Ltd.

A Mitsubishi spokesman did not rule out building a third train if there were demand from buyers. Asked to comment on the apparently higher investment figure, he said $5.0-$5.5 billion was an outside estimation, and that the official investment is $6 billion.

BP had said the project, with a total annual capacity of 7.6 million tons of LNG, already had contracts to supply China with 2.6 million tons a year, Japan with up to 6.5 million tons, the U.S. West Coast via Mexico with 3.7 million tons and South Korea with less than 1 million tons.

BP has said the EPC contracts for onshore work had been signed with a consortium of U.S.-based Kellogg, Brown & Root, a unit of Halliburton . Other members are Japan's JGC Corp and Indonesian firm PT Pertafenikki Engineering.

Italian engineering group Saipem , controlled by Italian oil firm ENI, has won the contract to build offshore installations and pipelines, BP had said.

The Tangguh project, located 3,000 km (1,880 miles) east of the capital Jakarta, represents a core profit centre for global oil giant BP as LNG demand is expected to jump in coming years.

For Indonesia, the world's biggest supplier of the super-cooled, compressed gas, it will help offset declining output from other LNG facilities and provide much-needed revenue.(*)