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Tokyo Gas to buy stake in Indonesia's Sengkang project

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 6 -- Tokyo Gas Co. late last month reported that it will produce and sell LNG following its purchase of a stake in Energy World Corp.’s (EWC) Sengkang project in Indonesia’s South Sulawesi province.

Under the agreement, Tokyo Gas will buy a 25% stake in the Sengkang project, which is comprised of four developments: natural gas fields, power generation for the island, LNG production, and LNG sales.

The Sengkang project, wholly owned by EWC, is expected to produce 2 million tonnes/year of LNG starting in 2011, with Tokyo Gas to import 500,000 tpy starting in 2012.

Hiroshi Kishino, Tokyo Gas business development general manager, said the company hopes to arrange for a more flexible supply of LNG by involving itself in gas field development as well as LNG and electricity production.

Kishino said joining upstream operations would give the Japanese firm a better understanding of the business along with opportunities to adjust the flow of LNG to Japan.

Analyst BMI noted the Sengkang deal will enable Tokyo Gas to make up for the 500,000 tpy of gas it missed by withdrawing from negotiations for supplies from the Tangguh LNG project.

For EWC, BMI said, “The deal with Tokyo Gas will bring in a more technically experienced partner, which can share construction costs while guaranteeing an external buyer for gas output.”

Earlier this year, Indonesia's upstream oil and gas regulator BPMigas rejected a plan of development for the LNG project proposed by Energy Equity Epic Sengkang, a wholly owned subsidiary of EWC.

“The plan of development is not backed up with valid data,” BPMigas Chairman R. Priyono said at that time. He added, “How can we approve the plan of development if we don't even know the reserve data? (OGJ Online, Feb. 8, 2010).”

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