Global oil and gas giant BP will provide a long-term supply of liquefied natural gas (LNG) to state electricity company PT PLN from a planned third LNG train at its Tangguh LNG plant in Teluk Bintuni, West Papua.
BP Asia-Pacific regional president William Lin told The Jakarta Post on Thursday that the UK-based energy company had executed a memorandum of understanding on the deal with PLN in May.
BP, the Energy and Mineral Resources Ministry’s oil and gas directorate and upstream oil and
gas regulator BPMigas agreed that up to 40 percent of the LNG from the third train would be allocated for the domestic market, Lin said in an email on Thursday.
The agreement also stipulates that BP and its partners will sell 4 megawatts ( MW) of electricity from the Tangguh plant to PLN to be distributed to local communities starting in January, which will be increased to 8 MW in subsequent years.
Lin added that BP, PLN and the government were still finalising details of the project, including the price of the LNG to be sold to PLN.
BP, which holds a 37.16 percent stake in the Tangguh plant, was scheduled to submit its Plan
of Further Development (POFD) for the third train to BPMigas in August, as previously reported by Reuters.
Lin said the third train remained on track.
“Right now, BP is ready to submit POFD,” he added.
The Tangguh plant currently comprises two production trains able to produce 7.6 million tonnes of LNG a year. The third train, which reportedly will require a US$12 billion investment, will produce an additional 3.8 million tonnes a year for a total combined capacity of 11.4 million tonnes of LNG per annum (MTPA).
All the LNG currently produced by the plant has been allocated for export, with 3.6 MTPA sent to
Sempra Energy in the US, 2.6 MTPA to China and 1 MTPA to South Korea.
BP’s partners in Tangguh include MI Berau BV, which holds a 16.3 percent stake in the plant;
CNOOC Ltd (13.9 percent), Nippon Oil Exploration (Berau) Ltd, (12.23 percent), KG Berau/KG Wiriagar (10 percent), LNG Japan Corporation (7.35 percent) and Australia-based Talisman (3.06 percent).
Separately, Indonesia BP head Dharmawan H. Samsu told reporters in Jakarta on Thursday that the firm planned to make a final investment decision on the third train in 2014.
“If we want the train to begin operation in 2018 and start LNG production in early 2019, the final investment decision must take place in 2014,” he said.
Separately, BP Group chief economist Christof Ruhl told the Post that the recent decline in LNG prices were short term and would not affect the firm’s oil and gas investments, including the Tangguh expansion plan.
“The recent decline is rooted in the decline of economic growth in Asia. LNG investment is not about a year or two, but about the next 20 years,” Ruhl said.
In August, gas futures for September delivery fell 7.9 percent, their biggest decline since September 2009, to $2.92 per million British thermal units (mbtu) at the New York Mercantile Exchange, as reported by Bloomberg.
Meanwhile, BPMigas planning chief Widyawan Prawiraatmadja said that he expected BPMigas to submit its POFD next week.
Komaidi Notonegoro, the vice director of the ReforMiner Institute, an Indonesian energy sector think tank, welcomed the idea allot almost a half of the production of BP’s third LNG train at Tangguh plant for domestic consumption.
“However, it is very important for the scheme to be implemented real soon,” he said.