Indonesian oil minister wants Donggi gas for domestic market

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Aug. 10 -- Indonesia’s state-owned PT Pertamina and partner PT Medco Energi Internasional should sell natural gas intended for their PT Donggi-Senoro LNG plant to the domestic market, according to a government minister.

“If I am part of the consortium, I will find domestic buyers who can purchase gas with an economical price. If no buyers at home are interested, I will report to the government,” said Minister for Energy and Mineral Resources Purnomo Yusgiantoro.

“I think gas is more needed now due to an international pressure for companies to use clean energy, so Pertamina and Medco don’t have to be worried about buyers,” Purnomo said, adding that the government would help the consortium to find buyers.

The Donggi-Senoro LNG consortium, which also includes Mitsubishi Corp., signed a heads of agreement with Kansai Electric Power Co. Inc. and Chubu Power Co. Inc. stipulating that each power company would receive 1 million tonnes/year of LNG from the plant for 12 years, starting in 2012.

However, the contracts and the project’s viability fell into a state of uncertainty after Indonesia Vice-President Jusuf Kalla said in June that gas from the Senoro and Matindok fields intended to supply the Donggi LNG plant had to be sold domestically and not abroad.

Medco, through its subsidiary PT Medco E&P, owns 50% of Senoro gas field, while Pertamina owns the remaining interest. Pertamina owns 100% of Matindok gas field.

To give Pertamina and Medco time to negotiate with the government, Chubu and Kansai extended the HOA several times, with the last extension expiring at the end of July and no new agreement in place.

"Yes, the agreements have expired,” said Hari Karyuliarto, Pertamina's head of LNG business, on Aug. 3. “Now, the buyers can officially terminate their contracts at any time.”

Last month, Karen Agustiawan, Pertamina president director, said the firm was holding talks with a small number of alternative buyers for the sale of LNG from the Donggi-Senoro LNG plant.

"We are in talks with fewer than three companies," she said, adding that all three potential buyers are from Asia (OGJ Online, July 30, 2009).

Mitsubishi holds a 51% stake in the Donggi LNG project, while Pertamina holds 29% and PT Medco Energi Internasional holds 20%.

Contact Eric Watkins at [email protected].