Tangguh LNG plant nearing completion

Ika Krismantari, The Jakarta Post, Jakarta

The Tangguh LNG plant, located in a Papua 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, an official says.

Kardaya Warnika, chairman of the Upstream Oil and Gas Executive Agency (BP Migas), told journalists Tuesday that the construction of the plant, to be operated by a consortium led by BP Indonesia, was 70 percent completed.

Having already secured more than $2 billion in loans, Kardaya said negotiations between BP and a group of Chinese banks for $884 million in loans were still underway.

To build the plant, the third in the country after the Arun and Bontang LNG plants, BP needs financing of $6.5 billion, of which $3.5 billion consists of loans, with the remainder coming from the company's own resources.

In August last year, BP secured loans of $2.616 billion, made up of $1.2 billion from the Japan Bank for International Corporation, $350 million from the Asian Development Bank and $1.066 billion from commercial banks.

If the latest loan negotiations are successful, the loans from the Chinese banks should be disbursed some time in April.

BP Migas records show that the government has signed contracts with Fujian-China for the delivery of 2.6 mmtpa (million metric tons per annum) 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 U.S. West Coast for 3.7 mmtpa over 20 years, with prices ranging from $3.5 to $5.94 per mmbtu (million British thermal unit).

BP Indonesia operates the Tangguh block together with Japan's LNG Corporation, Nippon Oil Corporation and CNOOC.