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Indonesia signs five gas supply deals, including LNG deal with BP

Friday, October 17, 2014 - 18:45
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Indonesia on Friday signed five natural gas agreements for domestic supply that are expected to increase state revenues by up to US$10.5 billion, as the country continues to divert more of its energy output to meet rapidly expanding domestic demand. -- PHOTO: REUTERS

[Jakarta] Indonesia on Friday signed five natural gas agreements for domestic supply that are expected to increase state revenues by up to US$10.5 billion, as the country continues to divert more of its energy output to meet rapidly expanding domestic demand.

Buyers include state power utility Perusahaan Listrik Negara (PLN), which signed a deal to purchase liquefied natural gas (LNG) from the Tangguh LNG project, operated by BP in Indonesia's West Papua province.

The BP Tangguh-PLN deal will supply Indonesia with an estimated 400 cargoes of LNG over the 19-year contract, regulator spokesman Rudianto Rimbono told Reuters, adding that this was the country's biggest domestic gas supply deal ever.

Indonesia is still one of the world's biggest LNG exporters, but with domestic output slipping and local demand growing, the country has started consuming more of its natural gas and seeking supply from overseas.

Some of the Tangguh gas will be sent to PLN via the Arun regasification plant, operated by state energy company Pertamina and now undergoing conversion into a receiving terminal from LNG production.

According to Pertamina Engineering and Operations chief Salis Aprilian, the firm hopes to begin receiving gas at the Arun terminal shortly after it is completed on Dec 10. "We need LNG supply for commissioning. That's why we persuaded PLN to ask BP to ship the LNG in January 2015,"Aprilian said, adding that commercial operation was expected to begin two weeks after commissioning.

PLN's contract with BP is to run through 2033, Rimbono said.

PLN expects to receive the gas through a new 370-kilometer transmission pipeline linking the Arun facility to its gas fired power station in Balongan and industrial users in the region.

BP will supply PLN with up to 1.5 million tonnes of LNG a year, BP Regional President Asia Pacific Chistina Verchere said in a statement confirming the deal with PLN.

The gas will eventually be sourced from Tangguh's third LNG train, expected to begin production in 2019, BP's statement said. Initial supply to PLN will come from the Tangguh project's existing two LNG trains.

About 40 per cent of the annual LNG production from the third train at Tangguh will be committed to PLN, Verchere said.

Malaysia's state energy firm Petronas and units of Indonesia's Medco Energi and Pertamina also signed deals to supply piped gas to several domestic buyers, including PLN, on Friday.

Medco signed a deal to supply 6.6 trillion British thermal units gas over 21 months to a gas-fired power station in Sumatra at US$7.32 per million British thermal units (mmBtu), with the sales price to increase by 3 per cent a year.

Another Medco deal is to supply 805,000 mmBtu to a gas-fired power generation unit in North Kalimantan at US$5.52 per mmBtu.

No total value was available for the five deals.

Indonesia's LNG exports have fallen by 40 per cent since 1999 when it supplied one-third of global consumption, according to the US Energy Information Administration.

Pertamina is in the process of negotiating its third contract to import LNG, Aprilian also told reporters on Friday, without naming a company that would supply the gas. The deal would supply Indonesia with 1.5 million tonnes per year (mtpa) of the super-cooled fuel from Mozambique for 20 years.

In 2006, the Southeast Asian country was overtaken by Qatar as the world's largest LNG exporter. REUTERS

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