Tangguh LNG plant on schedule; BP sets up funding

Eric Watkins
Senior Correspondent

LOS ANGELES, May 11 -- Indonesian state-owned banks, Bank Mandiri and Bank Negara Indonesia (BNI), are seeking to join a new syndicate of lenders that intend to fund the remaining construction costs for a $6.5 billion LNG plant being built at Tangguh.

BP PLC is setting up in July the new consortium comprised of international and domestic lenders to fund the remaining $884 million required under original financing plans for the plant's completion.

When operational, the Tangguh plant is expected to supply 2.6 million tonnes/year of gas over 25 years to Fujian in China, with SK Power Korea taking 0.55 million tonnes/year over 20 years; Posco Korea 0.55 million tonnes/year over 20 years; and Sempra, San Diego, 3.7 million tonnes/year over 20 years.

By March this year, reports said construction on the facility was 70% complete and that startup was still expected by fourth quarter 2008, if operator BP Indonesia received the outstanding financing (OGJ Online, Mar. 01, 2007).

On May 8 Eddy Purwanto, Upstream Oil and Gas Executive Agency (BP Migas) deputy chairman for marketing and finance, said invitations were to be sent this month to Indonesian banks and that the loan disbursement is expected in October.

BP and partners last August signed three separate facilities for some $2.62 billion of their $3.5 billion loan requirement. The final $884 million tranche awaited what one banker called "government-level negotiations" over the sale of Tangguh gas to China.

According to industry observers, China was linking its financial involvement in the project to securing long-term supplies of LNG at preferential rates.

Partners in the Tangguh LNG project are BP 37.16%, CNOOC 16.96%, MI Berau BV (a joint venture of Mitsubishi Corp. and INPEX Corp. 16.30%, Nippon Oil Exploration (Berau) Ltd. (a JV of Nippon Oil Exploration and JOGMEC) 12.23%, KG Berau-KG Wiriagar (a JV of Kanematsu Corp., JOGMEC, and Mitsui & Co 10%, LNG Japan Corp. (a JV of Sumitomo Corp. and Sojitz Corp.7.35%).

Contact Eric Watkins at hippalus@yahoo.com.

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