Excess LNG from Tangguh to be sold on spot market

The Jakarta Post| May 08, 2012 | Rangga D. Fadillah,

Indonesia has the opportunity to profit from eight cargoes of liquefied natural gas (LNG) from the Tangguh LNG plant in Papua that have not been availed of by US-based Sempra Energy, upstream oil and gas authority BPMigas has revealed.

Following the gas supply boom in the US, which has caused a drop in the price of gas, Sempra decided not to take up its LNG allocation from Tangguh in favor of cheaper domestic gas, thus allowing the Indonesian government to take back around 90 percent of the allocation, BPMigas operational deputy Rudi Rubiandini said.

“We hope we can sell the eight cargoes at a good price to generate significant additional income for the country,” he explained in Jakarta on Monday.

Every year since the Tangguh LNG plant commenced deliveries in 2009, as many as 60 cargoes, or 3.7 million tons per annum (mtpa), have been sent to Sempra Energy. However, the government and the company have an agreement on the diversion of 90 percent of this allocation for the country’s purposes with compensation of around 1.5 percent of the LNG price.

The price of LNG sent to Sempra followed the Henry Hub Natural Gas price. Combined with transportation costs, the price stands at between $7 and $9 per million British thermal units (Btu), the agency said.

On the spot market, LNG sells for between $17 and $18 per million Btu.

“The official agreement on the LNG diversion was made around two weeks ago,” Rudi said.

The diverted gas will be used to fulfill the country’s growing gas demand, particularly following the completion of a floating storage and re-gasification unit (FSRU) in Jakarta Bay, West Java.

“Next year, in addition to the diverted LNG from Sempra, the Tangguh field will have abundant stocks because we no longer have to send LNG to Korea as compensation for the plant’s late operation,”
Rudi revealed.

“If the government says it has to be allocated to the West Java FSRU, we’re ready. The stocks for the planned Arun LNG receiving terminal in Aceh or the Belawan FSRU in North Sumatera [planned to be relocated to Lampung] are also available next year,” he continued.

The West Java FSRU has secured a 1-mtpa LNG supply contract from the Bontang LNG field in East Kalimantan. The supply is only half of the FSRU’s maximum capacity; the remainder is expected to come from Tangguh.

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 on a 25-year contract. The remaining production is exported to Japan, Korea and Taiwan.

The government also plans to renegotiate the Fujian contract as the LNG price is pegged at only $3.4 per million Btu.

In 2011, Indonesia exported contracted LNG worth $13.87 billion. Tangguh contributed 11 percent of the total value.


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