Indonesia to increase selling price of Tangguh LNG

Indonesia wants to renegotiate the price of a liquefied natural gas deal to South Korea, less than a year after it forced a major Chinese customer to pay more. Soaring construction costs, sustained higher oil prices and a shortage of LNG before 2012 has emboldened producers such as Indonesia, until last year the world's biggest exporter, to demand significantly higher long-term prices from consumers, Reuters reported.

"Currently, there are talks to increase our price to South Korea and a diversion of some of our sales from the West Coast (of the United States) to the Japanese market," energy minister Purnomo Yusgiantoro said in a written statement to the Indonesian national parliament.

The country has a contract to supply a total of 1.1 million tonnes of LNG to two Korean companies for the next 20 years from its Tangguh field in Papua Barat (West Papua)_province, operated by BP with Japanese and Chinese partners.

West Papua's Tangguh LNG plant nearly completed

The Tangguh LNG plant, located in a Papua Barat (West Papua) province gas field with proven reserves of more than 14 trillion cubic feet, is entering the final phase of construction and is expected to commence initial production by the last quarter of 2008, Kardaya Warnika, chairman of BP Migas (Indonesia's Upstream Oil and Gas Executive Agency), told media. He said construction of the plant, to be operated by a consortium led by BP Indonesia (and inckluding Japan's LNG Corporation and Nippon Oil Corporation and China's CNOOC) was 70 percent completed.

Having already secured more than US$2 billion in loans, Kardaya said negotiations between BP and a group of Chinese banks for US$884 million in loans were still underway. To build the plant BP needs financing of US$6.5 billion, of which US$3.5 billion consists of loans, with the remainder coming from the company's own resources.

BP Migas records show that the government has signed contracts with Fujian-China for the delivery of 2.6 mmtpa of gas over 25 years from Tangguh, with SK Power Korea for 0.55 mmtpa over 20 years, with Posco Korea for 0.55 mmtpa over 20 years and with US West Coast for 3.7 mmtpa over 20 years, Ika Krismantari reported for The Jakarta Post.