Indonesia loses out on LNG deal
Indonesia loses out on Sulawesi LNG deal
Indonesia has lost its chance to sell liquefied natural gas from a Sulawesi project due to uncertainty over the project's outlook and political pressure to supply gas for the domestic market, according to reports.
News wires 04 May 2010 10:18 GMT
The Donggi-Senoro project in Sulawesi, which will require $1.7 billion for upstream activities and $2 billion for downstream, was now expected to go on stream in 2014.
"There are a lot of LNG projects in the world that will enter the market, including one from Qatar. The one from Sulawesi has already lost its chance to go into the market," Ari Soemarno, a former state oil company Pertamina director, told Reuters.
"Currently, the government is not clear about whether it will approve the Donggi-Senoro project or not. Buyers will certainly look to other sources to buy LNG."
The cost of building the Donggi-Senoro LNG project was very expensive and it would be very difficult for domestic buyers to accept the price, Soemarno added.
"The cost of gas will be about $12 per million British thermal unit at a receiving terminal in Java island. I don't think domestic buyers can accept the price at that level," Soemarno said.
Separately, Pertamina president director Karen Agustiawan said Korea Gas Corporation (Kogas), Japan's Kyushu Electric Power Company, and Chubu Electric Power Company may pull out from buying LNG from the Donggi-Senoro project because of uncertainty over how the project would proceed.
"The buyers have run out its patience because of a delay in the project. There are a lot of LNG offers from other sources, such as Australia and Qatar," Agustiawan said.
"It will be normal for the buyers to pull out from Donggi-Senoro LNG project," she added.
Pertamina, together with Indonesia's PT Medco Energi International and Japan's Mitsubishi Corporation, had previously agreed to build the Donggi-Senoro LNG plant in Sulawesi, with a capacity of 2 million tonnes per year.
But the government later decided that LNG produced at Donggi-Senoro must be sold to the domestic market only.
That decision followed a government decree issued in September 2009 to allow companies to export gas if there were no domestic buyers.
Pertamina said in March it has begun talks with foreign buyers such as Kogas, the world's biggest corporate buyer of LNG, and Kyushu, as it expected the government to relax its regulation.
Pertamina and Medco had previously agreed to sell 1 million tonnes of LNG from Donggi-Senoro to Chubu and 1 million tonnes to Kansai Electric linked to a cocktail of Japanese crude prices.
The contracts were due to run for 15 years.
But Kansai has pulled out because of uncertainty over the project and Chubu is still waiting to see the development.
Published: 04 May 2010 10:18 GMT | Last updated: 04 May 2010 10:20 GMT