Senoro LNG plant delayed to 2012

Ika Krismantari, The Jakarta Post, Jakarta | Wed, 04/30/2008 1:10 PM

A planned Liquefied Natural Gas (LNG) plant in Senoro, Central Sulawesi, is set to commence operations later than expected as parties involved in the project have yet to reach a deal on gas prices, an official said.

Lukman Mahfoedz, president director of Medco E&P, said the Senoro plant, which would become the country's fourth LNG plant, would start production in the first quarter of 2012 instead of in the second quarter of 2011 as previously expected.

Medco E&P holds a 20 percent participating interest in the project, while state-owned oil and gas company PT Pertamina holds 29 percent and Japan-based Mitsubishi Corp. the remaining 51 percent.

The plant plans to buy natural gas from two gas fields located in Senoro. The first, Toili block, is jointly owned by Pertamina and Medco, while the second, Donggi block, by Pertamina.

"We have extended the target for initial production as negotiations on the gas prices have yet to reach an agreement," Lukman said, adding that Mitsubishi had agreed to buy gas at a non-fixed rate linked to global crude oil prices.

This marks the project's second delay, as the project was initially expected to go online in 2010, but was delayed until 2011 amid similar price uncertainties.

Lukman said the investment needed for the plant's construction had just rose by 16.6 percent to US$1.4 billion from a previous estimate due to metal price hikes.

Upstream Oil and Gas regulator BPMiga's Deputy Chairman for Financing and Marketing Eddy Purwanto said there was uncertainty because his agency was still calculating the budget needed to develop the gas fields supplying the plant.

Indonesia, the world's third largest gas exporter, currently operates two LNG plants. The Arun LNG plant in Nanggroe Aceh Darussalam has a total capacity of 12.5 million tons per year, while the Bontang plant in East Kalimantan has a 18.5 million tons per year capacity.

Under construction is a third plant in Papua, designed to have capacity of 7.6 million tons per year.

British-based oil giant BP, which operates the plant, has targeted operations to begin by the end of this year.