Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, July 30 -- Indonesia’s state-owned PT Pertamina is holding talks with a small number of alternative buyers for the sale of LNG from its Donggi-Senoro plant in central Sulawesi.
"We are in talks with fewer than three companies," said Karen Agustiawan, Pertamina's president director, who added that all three potential buyers are from Asia. The negotiations are taking place as agreements with Japanese buyers are nearing their expiry date.
PT Donggi Senoro LNG—a consortium of Mitsubishi Corp. 51%, Pertamina 29%, and PT Medco Energei Internasional 20%—signed a heads of agreement to supply Kansai Electric Power Co. Inc. and Chubu Power Co. Inc. with 1 million tonnes/year of LNG for 12 years starting from 2012.
However, that agreement, as well as the project as a whole, came into question in June when Indonesia’s Vice-President Jusuf Kalla said gas from the Senoro and Matindok fields, which would supply the LNG plant, had to be sold domestically.
Medco, through its subsidiary PT Medco E&P, owns 50% of Senoro field, while Pertamina owns the remaining 50%. Pertamina owns 100% of Matindok field.
Chubu and Kansai agreed to extend the deadline on the HOA to the end of July to give the government and the Dongii-Senoro consortium time to achieve an agreement concerning the disposition of the gas. However, company officials say the project will be uneconomic if it serves only the domestic market.
According to data from Pertamina and Medco, the Donggi-Senoro LNG plant will need at least 335 MMscfd of gas—250 MMscfd from Senoro and 85 MMscfd from Matindok—at $6.16/MMbtu to be economic.
In June PT Medco Energi Internasional Project Director Lukman Mahfoedz said that with the Japan crude cocktail price of $70/bbl, the price of the LNG for Kansai and Chubu would be $10.90/MMbtu.
“This is higher than the current price of LNG at the spot market of about $5/MMbtu," said Lukman, who this week retained hope that the original agreement with the Japanese firms will continue.
"The Donggi-Senoro consortium is still committed to establishing partnerships with Chubu and Kansai,” said Lukman. "For now, we are talking with the government and are optimistic about this as we have complied with all regulations, including our obligations to the domestic market.”
However, Karen said that the government is talking with other buyers because Chubu and Kansai have not extended the deadline for the HOA beyond July. "As of today, there is no deadline extension,” she said.
Contact Eric Watkins at [email protected].