Total says LNG terminal in Java better than Kalimantan-Java pipeline

French energy giant Total SA said on Monday that building an LNG receiving terminal in Java to meet increasing gas supply demand in the island is more sensible than developing gas pipeline from East Kalimantan.

?Total is giving advice to build LNG Terminal (in Java) since the LNG terminal makes more sense as it can bring gas coming from different areas LNG terminal is more flexible, pipeline is less flexible,? Christophe de Margerie Executive Vice President President Exploration& Production Total SA told reporters after a meeting with Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

Margerie said that LNG receiving terminal could be very flexible as it could get supply from Arun, Bontang or Tangguh LNG plants or even from overseas sources. Gas pipeline, according to him, can only be economical if it transported a certain minimum volume of gas.

The government is currently in the process of tendering right to build gas pipeline from East Kalimantan to Central Java. Industry sources said that the 1,200-km pipeline would require more than US1 Billion investment and would require around 1 BCFD of gas of gas to be transported in order to reach economic viability.

Total, together with partner Inpex, is currently Indonesia?s top gas producer and major gas supplier to Bontang LNG plant, producing some 2.6 BCFD from Mahakam PSC in East Kalimantan.

Sources said that East Kalimantan PSCs are both keenly supporting the pipeline development for various reasons, including unavailability of long-term supply of gas, security of payment s and the fact that it would be more profitable to sell gas in LNG form than piped gas.

East Kalimantan PSCs are now faced with gas supply shortage problems due to inability of Chevron and Vico Indonesia to meet gas production target, forcing Bontang to cut LNG shipments to customers in South Korea, Japan and Taiwan.

Margerie said that Total would spend around US$1.2 billion in Capital expenditure in Indonesia this year. Margerie said that according to reserves calculation, Total would be able to increase gas production from Mahakam PSC. Total is currently lobbying for government to approve early contract extension of Mahakam PSC to enable the company to further increase gas production. Mahakam PSC contract would expire in 2017. (godang)