BP’s Tangguh project may be postponed

Amahl S. Azwar, The Jakarta Post, Jakarta | Headlines | Tue, March 26 2013, 9:51 AM

The plan by oil and gas giant BP to build a third liquefaction train at its Tangguh plant in Papua could be delayed for a year due to an objection from the local administration over revenue sharing from the site.

Aside from the revenue issue, environmental concerns have also become a major concern as the environmental impact analysis (Amdal) that BP submitted has not yet been approved by the local administration.

Widhyawan Prawiraatmadja, the commercial deputy at upstream oil and gas regulatory special task force SKKMigas, said the prolonged discussions on those matters could serve to potentially delay the Train 3 project.

“Basically, they [local administration officials] still hold grudges on the revenue-sharing issue at the Tangguh plant following the construction of Train 3. If they aren’t happy then it will become a problem,” he told The Jakarta Post on Monday.

Train 3, which will have a production capacity of 3.8 million metric tons per annum (MTPA), is the expansion project of the Tangguh facility, located in Teluk Bintuni, West Papua and in which BP holds a 37.16 percent stake.

The plant currently comprises two production trains that are able to produce 7.6 million tons of liquefied natural gas (LNG) a year. BP started the first production for the first LNG train in February 2009 and the second one, Train 2, in July 2009.

The third train will produce an additional 3.8 million tons a year for a total combined capacity of 11.4 MTPA of LNG.

Widhyawan, formerly the planning deputy with SKKMigas, said the regulator was currently mediating discussion between the British contractor and the local administration to solve the issue, and cited that “if the situation persists the project may have to be delayed for a year”.

“One of the local administration’s concerns is that it fears the process of constructing the Train 3 facility will lower its share of revenue from Tangguh as whole. We have asked the contractor to ensure that this is not going to happen,” said the official.

The Papua administration has received a 70 percent share of state revenue from the Tangguh facility while the government has received a 30 percent share before tax, according to Widhyawan.

“Once Train 3 starts to operate, the local administration will receive even bigger revenue. It’s just a matter of perspective and we’re working on it,” he said.

Late last year, the Indonesian government approved the US$12 billion Train 3 project.

BP Asia-Pacific regional president William Lin said previously that with the approval, the final investment decision for the project might be taken in 2014, which meant the new train could begin operating in 2018.

http://www.thejakartapost.com/news/2013/03/26/bp-s-tangguh-project-may-be-postponed.html

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