The Indonesian government has approved in principal British oil and gas giant BP’s plan to build a third US$12 billion liquefied natural gas (LNG) train at the firm’s Tangguh plant in Teluk Bintuni, West Papua.
The approval was announced on Friday by UK Prime Minister David Cameron, after he held a bilateral meeting with President Susilo Bambang Yudhoyono, who is visiting London this week.
Also at the meeting were Energy and Mineral Resources Minister Jero Wacik, BP group chief executive Bob Dudley and BP Asia-Pacific regional president William Lin.
“This is great news for BP, one of the largest foreign investors in Indonesia. It is a huge boost to the UK’s growing trade and investment in Indonesia’s emerging market,” Cameron said in a statement.
BP submitted its plan of further development (POFD) for the third train to upstream oil and gas regulator BPMigas in September. The plan contains the economic and technical details of BP’s proposed expansion plan and will be used as the basis to build the train.
Lin said the POFD’s approval was an important step in preparation for BP’s final investment decision for the project. A final decision is expected in 2014, which means the new train could begin operation by 2018.
Dudley said that the approval marked important progress for reaching the full potential of Tangguh, adding that BP and its partners would soon offer tenders for the front-end engineering and design (FEED) services for the third train.
The train, which will have an estimated production capacity of 3.8 metric tons per annum (mtpa) when complete, is expected to boost total production at Tangguh to 11.4 mtpa.
As part of the POFD, BP and its partners have agreed to sell 40 percent of the LNG output from the third train to state electricity firm PT PLN for the Indonesian domestic market.
Further, up to 15 million standard cubic feet a day of piped gas from the Tangguh fields will be allocated for local sale after the third train began production. The amount is sufficient to generate 50 megawatts (MW) of power.
The plan also includes an agreement for PLN to sell up to 8 MW of power generated at the Tangguh plant to residential communities in the Teluk Bintuni regency.
The electricity is expected to be provided in stages, with the first 4 MW available in January 2013, and a further 4 MW slated to be provided to PLN in following years.
Separately, BPMigas operations deputy Gde Pradnyana confirmed that BPMigas had approved BP’s proposal, saying that the regulator would publish the agreement letters for the POFD in Jakarta, after BP met several additional technical requirements.
“In principal, we have already approved the Tangguh expansion project and now we are just waiting for the legal aspects,” he told the The Jakarta Post in a telephone interview.