Chubu Electric still discussing Donggi-Senoro LNG project

Chubu Electric Power Co. is still negotiating to buy liquefied natural gas from a Mitsubishi-led consortium that plans to build a plant on Indonesia's Sulawesi Island to export gas from the Senoro and Matindok gas fields.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Oct. 19 -- Chubu Electric Power Co. is still negotiating to buy liquefied natural gas from a Mitsubishi-led consortium that plans to build a plant on Indonesia's Sulawesi Island to export gas from the Senoro and Matindok gas fields.

Evita Legowo, director-general for oil and gas at Indonesia’s department of energy and mineral resources, said she expects to get a final decision on gas pricing for the Donggi-Senoro project by yearend.

She said negotiations continue, and there will be another meeting with stakeholders. If domestic buyers can't meet the requirements, there is a possibility for LNG export, she said. Potential domestic buyers include state electricity firm PT Perusahaan Listrik Negara (PLN), gas distribution firm PT Perusahaan Gas Negara (PGN) and some fertilizer firms.

The domestic buyers are seeking 211 million cu ft/day of gas out of the total 335 MMcfd derived from the two gas fields. They also want the gas at $4/MMbtus, while the consortium partners are seeking exports at the higher rate of $6.16/MMbtu.

Consortium partners have long said output from the project must be exported to ensure its economic viability. "We will convince the government that our scenario is still the best for the country,” said Lukman Mahfoedz, project director of consortium member Medco Energy in June. “According to law, priority is given to domestic utilization, but the gas can't be developed without achieving economic value. It all depends on the price,” said Evita.

Indonesia’s state-owned PT Pertamina along with PT Medco Energi International and Mitsubishi Corp. jointly agreed to build the Donggi-Senoro LNG facility, which will have a capacity of 2 million tonnes/year.

The plant is to receive natural gas from the Senoro and Matindok fields. 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.

The Donggi-Senoro LNG consortium 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 became uncertain after Indonesia Vice-President Jusuf Kalla said in June that gas from the Senoro and Matindok fields intended to supply the LNG plant had to be sold domestically and not abroad (OGJ, Aug 10, 2009).

Kansai Electric Power pulled out due to the uncertainty created over the project, but Chubu Power Co. has been biding its time while developments unfold.

Contact Eric Watkins at hippalus@yahoo.com.

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