BP, Eni Plan To Convert Coal Gas To LNG In Indonesia

The Wall Street Journal, James Herron of DOW JONES NEWSWIRES

LONDON (Dow Jones)--BP PLC (BP) and Eni SpA (E) have launched a consortium to convert natural gas found in Indonesian coal beds to liquefied natural gas for export, BP said in a statement Monday.

This venture will produce the first coal bed methane in Indonesia and could potentially be the first ever facility to convert that gas to LNG, although no startup date has been set, a BP spokesman said.

Demand for LNG is strong in Asia and is expected to grow again once the region emerges fully from the economic downturn. A number of projects are underway in Queensland, Australia, to convert coal bed methane, or CBM, into LNG for export to Asia and are expected to start in the middle of the next decade.

The consortium has signed a production-sharing contract with the Indonesian government covering 1,700 square kilometers of territory on the Sanga-Sanga block in East Kalimantan, where BP and Eni are already producing conventional natural gas, the statement said.

The consortium has committed to spending $38 million to determine the production capacity of the block, the statement said.

"This important new access to Sanga-Sanga's CBM resources will allow BP to continue to grow our LNG production in Indonesia and underlines Indonesia's continuing significance to BP," said the company's exploration and production chief, Andy Inglis.

"This is a brown field development...the infrastructure needed is all in place, as is the export infrastructure," at the Bontang LNG plant, said the BP spokesman.

BP Indonesia President William Lin said: "We expect production to begin rapidly--in a very few years--and its supply to Bontang will enable Indonesia to become the world's first CBM-to-LNG producer."

Taiwan's Opicoil Energy and Universe Gas and Oil also have a share in the project.

Companies' Web sites: www.bp.com www.eni.com

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com