'Western buyers' agree on new terms for future LNG supply contract

Indonesian upstream oil and gas authority BP Migas said on Monday that a group of liquefied natural gas (LNG) buyers from Japan known as "western buyers" had principally agreed that future LNG supply contract from Indonesia will adopt a ?single contract, dual sources? system.

?During my visit to Japan we have reached an understanding that any new contract with western buyers will be based on one contract with LNG supply coming from Bontang and Tangguh LNG. That would mean better security of supply for the buyers compared to the current ?single contract single supply' system,? said BP Migas chairman Rachmat Soedibjo.

He said the understanding was a step closer in the current negotiation toward securing LNG contract.

Earlier, Minister of energy and Mineral Resources Purnomo Yusgiantoro said western buyers had been looking to extend LNG contract with a volume of up to 12 million tons per annum starting around 2010, but said the finalization would depend on the terms and condition Indonesia offered.

Western buyers group are traditionally referred to as Kansai Electric Power Company, Kyushu Electric Power Company, Chubu Electric Power Company, Osaka Gas, Toho Gas Company, and Nippon Steel.

Rachmat went on to say that now the single contract dual source system had been agreed on, BP Migas would work to coordinate among gas producers about the new system.

?This system would need good internal coordination among East Kalimantan gas producers (TotalFinaElf, Vico Indonesia and Unocal) and Papua gas producer (BP Plc), especially regarding price formulation and the volume assigned to each LNG producer,? said Rachmat.

Indonesia is thus far the largest LNG producer with the commodity coming from Arun and Bontang LNG plants; shipping more than 23 million tons of LNG a year to power plants and other customers, mostly in Japan, South Korea and Taiwan. The third Indonesian LNG plant, the Tangguh LNG facility is scheduled to commence production in 2007. However, Indonesia?s dominance had been threatened by the emergence of aggressive new producers and internal problems in Indonesia. (godang)