Tangguh renegotiating team starts work in October

The government plans that a high-powered team to renegotiate the 2002 gas export deal from Tangguh field to China will start work in October to resolve the issue before the scheduled first shipment early next year, The Jakarta Post reported on Saturday.

?We expect that it will start effective this October,? State Minister of National Development Planning Paskah Suzetta said on Friday.

The forming of the team was announced by President Susilo Bambang Yudhoyono Thursday as a response to long discussions over the controversial liquefied natural gas (LNG) selling price.

The team will be led by the Coordinating Minister for the Economy, Sri Mulyani Indrawati, under the direct supervision of Vice President Jusuf Kalla.

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. (*)