LNG RI signs deal with Japan on gas sales extension

Benget Besalicto Tnb., THE JAKARTA POST, JAKARTA | Sat, 02/14/2009 10:52 AM  

Indonesia and Japan on Friday signed a preliminary agreement on a 10-year liquified natural gas (LNG) sales extension. 

The signing of the initial agreement took place in Osaka which could soon be followed up by the signing of the final contract, said upstream oil and gas regulator BPMigas chairman R. Priyono in a statement. 

Under the agreement, he said, six Japanese firms will get an extension of LNG sales from 2011 to 2020. The six Japanese companies are Chubu EPC, Kansai EPC, Kyushu EPC, Nippon Steel Co, Ltd, Osaka Gas Co, Ltd, and Toho Gas Co, Ltd. 

“Total sales commitment under the contract is 25 million tons, (over ten year) which will be supplied from the Bontang plant in East Kalimantan. The Bontang plant will get its supply from the Mahakam block, which is operated by Total Indonesia,” he said. 

State oil and  gas firm PT Pertamina and Inpex Corporation also took part in the signing.

For the first five years, three million tons of LNG will be shipped to Japan per year with two million tons being transported under CIF (Cost Insurance Freight) and another one million tons under FOB (Free on Board). 

For the second five years, two million tons of LNG will be delivered per year with one million tons being transported under CIF and the other one million under FOB. 

Priyono noted that Pertamina had also signed a Deliverability Resolution Agreement (DRA), which nullifies an LNG delivery shortage claim from the Japanese buyers so that Indonesia would not be burdened with  penalty costs. 

Previously, the six Japanese firms had filed a shortage claim of 90 shipments until 2010.

He said that of all the LNG exports some 75 percent will be transported by Indonesian companies. Previously, the Japanese firms had only agreed that 50 percent of the exported LNG be transported by  local firms. The rest was delivered by Japanese LNG tankers. 

“There are many Indonesian companies with capacity to transport LNG. Pertamina will make an invitation for bids for transportation contracts. 

“The delivery business is lucrative. For one LNG freight contract the company will get a fee of US$30,000 per day,” he said. 

But most of the gas output has been committed for exports. Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the government is seeking to reduce gas exports so that more gas supply will be made available for domestic use. 

Friday’s initial agreement will soon become a final contract. The new contract will then replace the existing 25-year-contract when it expires in 2010. 

Under the existing contract, Indonesia supplies 12 million tons of LNG to Japan per year.

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Six Japan firms eye extending Indonesia LNG deal