Indonesia to review prices on some LNG contracts

The Indonesian government is set to re-negotiate some of its LNG sales contracts, looking for deals considered uneconomical or below market price, in order to increase natural gas revenues.

The government hasn’t specified exactly which contracts it will review yet, but is known to have its eye on the Tangguh natural gas at Bintuni Bay in West Papua. The plant is owned by BP, the China National Offshore Oil Corp. and Mitsubishi Corp and CNOOC’s 2002 contract allows the company to buy gas at $2.40 per million British thermal units for 25 years–a much lower price than Indonesia’s two other LNG plants at Arun (Aceh province) and Bontang (East Kalimantan). Those facilities sell gas to Japan at $13-18 per million BTU.

Tangguh’s LNG is also exported to South Korea and California, according to the Jakarta Globe.

The Director General of oil & gas at Indonesia’s Energy Ministry, Evita Legowo, said the government would “definitely review gas sales prices that are below the economical price,” including sales through pipelines to countries like Malaysia and Singapore. When re-negotiating contracts, the government has been advised to keep in mind other factors that increase costs for producers above the wellhead price, such as distribution.

source & article: The Jakarta Globe

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