Tangguh to Sell Spare LNG Supplies

The Jakarta Globe | April 13, 2012

Indonesia’s Tangguh liquefied natural gas plant in West Papua plans to offer as many as eight cargoes of the fuel to the spot market, according to oil and gas regulator BPMigas.

“Six is the minimum, up to eight, depending on production,” Rudi Rubiandini, deputy of operations at BPMigas, said by telephone from Jakarta. The cargoes will begin loading in May and continue through the year, he said.

Maintenance planned at the facility in September and October will determine how many spare cargoes there are, he said, adding that Tangguh won’t halt production during the work.

Demand for LNG has surged since the earthquake in Japan in March last year halted 53 out of 54 nuclear reactors in the world’s third-largest economy, forcing the country to boost gas imports. China, Brazil, Argentina and India are all using more gas to power their growing economies.

The tender is to load ships that can carry 150,000 cubic meters of the chilled liquid fuel, Rubiandini said. “Excess production” triggered the sale, he said.

Northeast Asian spot LNG prices are currently about $16.05 per million British thermal units, according to World Gas Intelligence. That values each cargo at about $57 million, according to Bloomberg calculations.

LNG deliveries to Europe have declined amid lower prices as sellers favor markets in Asia, with Japan the world’s biggest LNG buyer. Gas for winter delivery in Britain, Europe’s biggest gas market, has fallen 5 percent since March 31, according to broker data compiled by Bloomberg.

The Tangguh project, in the east of Indonesia, has multiyear contracts to supply 2.6 million metric tons a year to China, 1.15 million tons a year to South Korea and as much as 3.7 million tons annually to the United States’ Sempra Energy, according to date from Poten and Partners, a global broker and commercial advisor.

Sempra agreed in February to amend its contract, giving Indonesia more flexibility to sell fuel to domestic buyers, or into the higher-priced Japanese market, rather than to Sempra’s import terminal in Mexico, Rubiandini said at the time.

BP, which holds 37 percent of the $5 billion plant, is studying a fourfold expansion as the region’s economic growth surges and Japan raised imports following its nuclear disaster. Current production capacity is 7.6 million tons of LNG a year.

Bloomberg

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