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Pertamina to make investment decision before year end

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October 22, 2008

Donggi LNG Project:
Pertamina to make investment decision before year end

Indonesia's Pertamina aims to get a final investment decision on its Donggi liquefied natural gas (LNG) project by the end of the year, a senior official at the state oil and gas firm said on Tuesday, after a previous target passed earlier this year without a result, reported Reuters.

"The aim is for FID (final investment decision) by November or December," Daniel Purba, general manager of LNG market development at Pertamina told reporters on the sidelines of an LNG conference organised by Conference Connection.

"It depends on the progress on the heads of agreements with sales partners," he added.

Industry experts have said supply talks with Kansai Electric Power Co Inc and Tohuko Electric to buy the project's entire output for 15 years were almost concluded. The $1.5 billion project has capacity of 2 millions tonnes of gas per year.

Pertamina, which partners with Medco Energi and Japan's Mitsubishi Corp, said in August it hoped to sign an agreement with the government that month.

If FID is secured, the plant was expected to be in operation by 2012, Purba said.

But asked whether the current credit crisis would delay the project's approval, he said: "It is always possible. I don't think it is time to say whether it is likely or not but it is always possible."

While prices had not yet been agreed with the two potential buyers, Purba said Pertamina was aiming for crude price parity.

The plant on Sulawesi island will give LNG production in Indonesia, the world's third-largest LNG exporter after Qatar and Malaysia, a much needed boost at a time when the country is struggling to juggle exports and local needs.

The outlook for Indonesia's LNG exports has been put in doubt by plans to divert more of its production to domestic use at a time when its oil and gas output has been under pressure from ageing fields and lags in bringing new production onstream.

The Southeast Asian country has failed to meet its contractual commitments to traditional markets such as Japan, South Korea and Taiwan due to a slump in production.

Indonesia has far more gas than oil but it faces limited supplies due to long-term LNG export commitments, which it is reviewing. The country has about 182 trillion cubic feet of natural gas reserves.

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