Japanese LNG buyers make new deal with Indonesia

Japanese buyers have agreed to forgive Indonesia's failures to supply 72 cargoes of LNG as part of a 10-year extension to supply contracts that were due to expire in 2010 and 2011.

April 1, 2008

2 min read

Eric Watkins
Senior Correspondent

LOS ANGELES, Apr. 1 -- Japanese buyers have agreed to forgive Indonesia's failures to supply 72 cargoes of LNG as part of a 10-year extension to supply contracts that were due to expire in 2010 and 2011.

Iin Arifin Takhyan, deputy director of Indonesia's state-run PT Pertamina, said his country has been released from liability for failing to deliver 72 LNG shipments to Japan last year and causing a gas shortage.

The new contracts are for 3 million tonnes/year over the first 5 years of the contract and 2 million tpy over the next 5 years. The extensions represent a significant cut over the current contracts which call for 12 million tpy.

The reduced supplies follow earlier announcements by the Indonesian government that it was planning to reduce LNG exports to Japan because it wants to use more gas for domestic purposes.

Iin said LNG will be sold at $15-16/MMbtu fob, and that the price of the gas is linked to the worldwide price for oil. If the crude price drops, the price of the LNG could also be lowered.

Analysts said that Indonesia's deal to raise LNG prices to Japan sets a new benchmark for Asian term contracts and increases the pressure on other gas deals currently under negotiation.

Contact Eric Watkins at [email protected].