Fujian may pay more for Tangguh gas

Amahl S. Azwar, The Jakarta Post | Headlines | Fri, May 17 2013, 9:47 AM

British oil and gas giant BP says it is backing government talks with China on a higher sales price for natural gas from its concession in Tangguh, West Papua.

“We want to get the best price possible,” BP Asia-Pacific regional president William Lin said on the sidelines of the 37th Indonesian Petroleum Association’s (IPA) meeting on Thursday.

BP, which holds a 37.16 percent stake in the Tangguh plant, operates the massive gas field, while Chinese state-owned oil and gas firm CNOOC controls a 13.9 percent stake in the field and buys 2.6 million tons of natural gas a year from Tangguh for China’s Fujian province.

Contacted separately, upstream watchdog SKKMigas head Rudi Rubiandini said government negotiators would fly to Beijing, China, on May 30 to begin discussions on raising the ceiling for gas sale prices to between US$7 and $11 per million British thermal unit (mmBtu).

Lin, however, declined to comment on the proposed new ceiling, saying that BP wanted “to reach the best figure we can on market-based pricing.”

Energy and Mineral Resources Minister Jero Wacik said last week that an agreement on a new price for gas from Tangguh would likely be reached by the year’s end.

Speaking to reporters after a meeting with CNOOC chairman Wang Yilin in Jakarta last week, Jero said that CNOOC had agreed to renegotiate its contract, which was signed in 2002 under the term of then-president Megawati Soekarnoputri.

The contract calls for a review of the price of Tangguh liquefied natural gas (LNG) every four years.

Prices were increased from $2.40 to a ceiling price of $3.40 mmBtu in 2006, when then-vice president Kalla called on his Chinese counterpart Xi Jinping to renegotiate the deal, saying that the LNG ceiling price was not relevant anymore given soaring global energy prices and a prolonged domestic supply scarcity. The government’s renegotiation efforts have waned after Kalla left office in October 2009.

Other Tangguh stakeholders include MI Berau BV (16.3 percent), Nippon Oil Exploration (Berau) Ltd. (12.23 percent), KG Berau/KG Wiriagar (10 percent), LNG Japan Corporation (7.35 percent) and Talisman (3.06 percent).

Tangguh, a massive gas project in Papua with estimated total proven gas reserves of 4.4 trillion cubic feet, comprises two production units with a combined annual output of 7.6 million tons of LNG.

A planned third train, expected to enter operation by 2018, would boost annual production capacity by an estimated 3.8 million tons when complete, bringing total annual production in Tangguh to 11.4 million tons.



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