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August 30, 2008

Indonesia eyes higher price for Tangguh LNG
Indonesia, the world's second-biggest producer of liquefied natural gas after Qatar, wants to get a better price for LNG from the Tangguh project in Papua, Reuters quote the country's chief economics minister as
saying Thursday.

The government is facing political pressure because the price for LNG from Tangguh for some contracts previously agreed with Asian countries is well below current world prices.

"The benchmark is some contracts Indonesia has made and the best contract in the world will become our reference," Sri Mulyani Indrawati told reporters when asked about the price the government wanted for Tangguh LNG.

She said President Susilo Bambang Yudhoyono and Vice President Jusuf Kalla would monitor price renegotiations.

Yudhoyono said that the price of LNG from Tangguh needed to be renegotiated because the contract made with China was based on a formula using a crude oil price of only $38 a barrel.

"In fact the price of oil now is around the level of $120 a barrel. If we don't struggle (to renegotiate the price) from now...the government will have big losses," Yudhoyono told cabinet members at meeting attended by reporters.

Indonesia hopes the Tangguh project, about 3,000 km (1,880 miles) east of Jakarta, will help offset declining output from other LNG facilities and provide much-needed revenue.

Contracts signed for the BP-led project include that with China National Offshore Oil Corp. (CNOOC) to lift 2.6 million tonnes per year (tpy) -- about a third of its capacity -- over 25 years to a new terminal in Fujian.

Tangguh has also secured contracts to supply 3.7 million tpy to the U.S. West Coast via Mexico and 1.1 million tpy to South Korea.

It is expected to produce 7.6 million tpy from two trains, with output expected from the fourth quarter of 2008.

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