Regulator says Tangguh Train 3 project to go ahead as planned

Amahl S. Azwar, The Jakarta Post, Jakarta | Business | Tue, April 30 2013, 11:40 AM

Upstream oil and gas regulator SKKMigas will back BP’s plan by to build a third liquefaction train at its Tangguh plant in West Papua, following the company’s decision to increase the local administration’s revenue from the site.

SKKMigas head Rudi Rubiandini told The Jakarta Post on Monday that the bureau was now “optimistic” BP’s environmental impact analysis (Amdal) would be approved by the local administration this year.

Approval of the Amdal is one of the major hurdles for a contractor if any project is to go ahead as planned.

“Starting in this year, the local administration will get a bigger share of revenue from the site. The negotiation is almost complete,” Rudi said.

The two production trains at the Tangguh plant are able to produce 7.6 million tons of liquefied natural gas (LNG) a year. BP started production from the first LNG train in February 2009 and the second in July 2009. The third train will produce an additional 3.8 million tons a year.

Tangguh LNG is the first fully-vertically integrated LNG operation in Indonesia, producing gas from Papua Barat offshore and delivering LNG to customers.

While most of the LNG produced is exported, at least 40 percent of production of the third LNG train will go to the domestic market.

The local administration has been disappointed with their share of revenue from the existing plant as the funds were only transferred to them after the project came online in 2010. In addition, the funds used for development at the plant have partially cut the administration’s revenue.

BP funds a wide range of integrated social programs, including community-based security and maximizing employment for local people during both construction and operations.

SKKMigas had guaranteed the revenue for the local administration as well as the central government would not be reduced by the US$12 billion construction of train 3.

“We already have several agreements with BP to ensure the project goes on as planned without harming Indonesia’s share,” he said.

In March this year, the regulator’s commercial deputy, Widhyawan Prawiraatmadja, said the plan to build Train 3 might be delayed for a year due to an objection from the local administration over revenue sharing from the site.

Separately, in an email, BP Asia-Pacific regional president William Lin said the project would not fall behind schedule.

“Tangguh’s Amdal process is progressing in parallel with our addressing several issues raised by the local administration. We are working together with SKKMigas and the local administration to resolve these issues,” he said.

Late last year, the government approved the project in Teluk Bintuni, West Papua, in which BP holds a 37.16 percent stake.

Earlier this year, state utility company PT PLN signed an agreement with BP in which the former would receive around 1 million metric tons of LNG per year from Tangguh for twenty years, starting in 2013.

BP expects the final investment decision for the project to be taken in 2014, which means the new train would begin operations in 2018.


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