The negotiation on the supply diversion of liquefied natural gas (LNG), produced by the Tangguh LNG plant in West Papua from the US-based company Sempra Energy to the domestic market, would be concluded in early May at the latest, said upstream oil and gas regulator BPMigas.
BPMigas head Raden Priyono said the progress of the negotiation had reached 98 percent. Clauses on the new amount of cargo to be delivered to Sempra had been agreed. He declined to reveal the precise figure.
“The remaining 2 percent is the final approval from Energy and Mineral Resources Ministry,” he told reporters at his office in Jakarta on Thursday.
“Around 90 percent of Sempra’s total allocation of 3.7 million tons per annum [mtpa] will be taken back by the government. That amount will give us more LNG to be allocated for the domestic market,” he added.
Under the contract between the government of Indonesia and Sempra, the government is allowed to divert half of the allocation for the company — around 1.85 mtpa — to other parties for a diversion fee of 50 US cents per million British thermal units (Btu). Starting in 2008, the deal says Sempra will receive the LNG supply for 20 years.
With the price of natural gas falling in the US, Sempra prefers to purchase gas from the US market compared to importing from Indonesia. Thus, the government has taken the initiative to take back more of the company’s allocation for domestic purposes.
“Sempra has no problem with the allocation cut because it also can’t ensure that if it continues importing LNG, the selling price in America will be good since the gas price in the market is now very low,” Priyono revealed.
Indonesia has planned to build three floating storage and re-gasification units (FSRU) to cope with the growing demand for gas from domestic users. The terminals will be located in West Java, Central Java and Lampung (which was previously planned to be located in Belawan, North Sumatra).
The gas diverted from Sempra’s allocation was planned to be sent to the Belawan FSRU, but since the project was relocated to Lampung, the government is now in talks to shift the gas for the Arun LNG plant in Aceh, which will be converted into a LNG receiving terminal.
The signing of the diversion agreement might be conducted together with the signing of the new contract for the gas delivered to Duyong in Malaysia from Natuna Block B, which was operated by ConocoPhillips, Priyono said. The gas price is revised from $3.1 per million Btu to $6. Under the gas sales contract, ConocoPhillips will deliver 250 billion Btu of gas per day to Malaysia-based Petronas Carigali.
The Tangguh gas field has a total production capacity of 7.6 mtpa. In addition to the 3.7 mtpa sent to Sempra, 2.64 mtpa of LNG is delivered to Fujian in China with a contract duration of 25 years. The remaining production is exported to Japan, Korea and Taiwan