October 13, 2009 / 6:41 AM / 10 years ago

Indonesia eyes end-yr Donggi gas price decision

SINGAPORE, Oct 13 (Reuters) - Indonesia aims to get a final decision on gas pricing for the Donggi-Senoro project in Sulawesi by year-end, a senior mines and energy ministry official said on Tuesday.

Local buyers are seeking gas at $4 per million British thermal unit (mmBtu), for the $3.7 billion project, which will include $1.7 billion for upstream activities and $2 billion for downstream.

On the other hand, contractors are asking for a higher rate of $6.16 per mmBtu.

“According to law, priority is given to domestic utilisation but the gas can’t be developed without achieving economic value. It all depends on the price,” Evita Legowo, director general of oil and gas at the ministry, told reporters.

“The final price levels may be a bit down. We hope to reach an agreement before the end of the year.”

State oil firm Pertamina, Indonesia’s PT Medco Energi International (MEDC.JK) and Japan’s Mitsubishi Corp (8058.T) have agreed to build the Donggi-Senoro plant, which will have a capacity of 2 million tonnes per year. [ID:nJAK396830]

The Sulawesi liquefied natural gas (LNG) plant, which will cost at least $1.4 billion to build, will receive natural gas from Pertamina and Medco.

Evita added the talks between the parties were ongoing and there will be “another meeting with stakeholders.”

“If the domestic buyers can’t fulfill (the requirements), there is a possibility for (LNG) export.”

Potential domestic buyers included state electricity firm PT Perusahaan Listrik Negara (PLN), gas distribution firm PT Perusahaan Gas Negara (PGN) (PGAS.JK) and some fertiliser firms. Local buyers had sought about 211 million cubic feet per day (mmcfd) of gas out of the total 335 mmcfd derived from the two gas fields.

Pertamina and Medco previously agreed to sell 1 million tonnes of LNG from Donggi-Senoro to Chubu Electric Power Co (9502.T) and 1 million tonnes to Kansai Electric (9503.T) linked to a cocktail of Japanese crude prices. The contracts were due to run for 15 years. [ID:nJAK442253]

Kansai pulled out because of uncertainty over the project but Chubu is still waiting to see developments.

The plant, due to be operational by 2012 or 2013, would give LNG production in Indonesia, the world’s third-biggest exporter after Qatar and Malaysia, a much-needed boost as the country struggles to juggle exports and local needs. (Reporting by Felicia Loo; Editing by Lincoln Feast)

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