Pertamina may accept less for domestic gas -source

By Muklis Ali

JAKARTA, Oct 12 (Reuters) - Indonesia's state oil and gas firm Pertamina may accept a lower price for gas supplied from a project in Sulawesi to domestic customers as long as it is allowed to export gas, a Pertamina source said on Monday.

There have been concerns that some planned gas projects, including the $3.7 billion Donggi-Senoro gas project in Sulawesi, could be uneconomic if firms are forced to supply only domestic buyers and the government last month issued a decree to allow firms to export gas if there were no domestic buyers.

"Pertamina wants to export the gas from Sulawesi but also fulfil obligations to supply the domestic market. The company may accept lower gas prices for domestic customers," the Pertamina source, who declined to be quoted by name, said.

Pertamina has previously said it was seeking a price of $6 per million British thermal unit (mmbtu) at the well head that would translate to $12 per mmbtu for consumers on Java island.

"However, the government must give approval first to allow exports before Pertamina sells domestically. If there is no export approval Pertamina cannot develop the gas field," the source said.

Indonesia is currently in talks to sell liquefied natural gas (LNG) from Donggi-Senoro to local buyers after a Japanese buyer pulled out. [ID:nJAK442253]

Potential domestic buyers included state electricity firm PT Perusahaan Listrik Negara (PLN), gas distribution firm PT Perusahaan Gas Negara (PGN) (PGAS.JK: Quote, Profile, Research) and some fertiliser firms. The Donggi-Senoro project, which will require $1.7 billion for upstream activities and $2 billion for downstream, has been in doubt since Vice President Jusuf Kalla said in June that gas from the project should be sold to the domestic market.

Pertamina, Indonesia's PT Medco Energi International (MEDC.JK: Quote, Profile, Research) and Japan's Mitsubishi Corp (8058.T: Quote, Profile, Research) had agreed to build the plant, which will have a capacity of 2 million tonnes per year.