Asian buyers to divert contracted Indonesian LNG

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 16 -- Buyers in Japan, South Korea, and Taiwan may divert up to 12 cargoes of contracted Indonesian LNG to other markets this year, according to a senior government official.

"They will not drop the imports [from Indonesia]," said Hari Karulianto, head of LNG business at Indonesian state-owned PT Pertamina. He said that decision came as the global economic downturn has reduced demand in the three Asian nations.

Hari said that the exact volume of the diverted cargoes remains unclear but that it "could be about 12 cargoes." He said the diverted LNG could be sold to markets in Asia or Europe.

Hari did not say which firms in the three Asian countries planned to divert their contracted supplies, but he noted that Japanese firms are looking to divert up to six cargoes of Indonesian LNG this year.

In February, Pertamina, PT Total E&P Indonesie, and Inpex Corp. agreed to extend the LNG supply contracts to six Japanese buyers. Under the preliminary agreement, the contract for Chubu EPC, Kansai EPC, Kyushu EPC, Nippon Steel Co. Ltd, Osaka Gas Co. Ltd., and Toho Gas Co. Ltd. will be extended from 2011 to 2020.

The agreement will involve 25 million tonnes of LNG to be shipped over the period from the Bontang LNG plant in East Kalimantan, which is supplied by the Total Indonesie-operated Mahakam Block.

Meanwhile, Lukman Mahfoedz, president director of PT Medco E&P Indonesia, a member of the consortium developing the Donggi and Senoro gas blocks in Central Sulawesi, said that LNG from those two blocks would be ready for delivery at yearend 2012.

He said Japan's Kansai Electric Power Co. Inc. and Chubu Electric Power Co. Inc. have each committed to buying 1 million tonnes/year of LNG from the project under a 15-year contract.

"We expect to start delivery of 1 or 2 cargoes of LNG to Japan by the end of 2012," Mahfoedz said, adding that a gas sales agreement was also expected to be signed soon.

Lukman said the consortium expects to obtain immediate government approval for project construction to begin. "As of today, 97% of the land has been cleared. The engineering design process also has been started. Thus, we are ready to move on," he said.

Mitsubishi Corp. owns a 51% stake in the Central Sulawesi project, while Pertamina holds 29% and Medco E&P 20%.

Contact Eric Watkins at hippalus@yahoo.com.

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