JAKARTA May 10 China National Offshore Company
(CNOOC Ltd) , China's largest offshore oil and
gas producer, will increase the price it pays for gas from BP's
Tannguh project in Indonesia, the head of Indonesia's energy
regulator said on Friday.
The existing 25-year supply deal, under which CNOOC ships
around 2.6 million tonnes of liquefied natural gas (LNG)
annually from Indonesia's West Papua province to China's second
LNG terminal in Fujian, was signed in September 2002.
Under this agreement, the gas price was linked to oil prices
and capped at $25 per barrel, and came to $2.40 per million
British thermal units (mmbtu). This was increased in 2006 but
remained capped at an oil price of $38 per barrel and came to
around $3.35 per mmbtu.
"The president of CNOOC told the Energy and Mineral
Resources Minister directly that they were ready to increase the
price," upstream oil and gas regulator SKKMigas chief Rudi
Rubiandini said in a press release, referring to a meeting
between Indonesia's energy minister Jero Wacik and CNOOC
chairman Wang Yilin in Jakarta on Friday.
During the meeting the energy minister told CNOOC that its
gas contract was no longer at an acceptable market price, energy
ministry spokesman Susyanto said in a separate statement.
In contrast to CNOOC, Indonesia sells gas to Japan and South
Korea for more than $16 per mmbtu and to domestic buyers for $10
"If it's above $7 or $8 that would be pretty good compared
to now," SKKMigas spokesman Elan Biantoro told Reuters adding
that the government was targeting a revised gas sale price above
$10 per mmbtu.
Along with BP, other Tangguh contract partners are MI
Berau B.V. (16.30 percent), CNOOC Ltd. (13.90 percent), Nippon
Oil Exploration (Berau), Ltd. (12.23 percent), KG Berau/KG
Wiriagar (10.00 percent), LNG Japan Corporation (7.35 percent),
and Talisman Energy Inc (3.06 percent).
The Tangguh LNG project is Indonesia's third LNG hub and
produces around 7.6 million tonnes of gas each year, with plans
in place to add another 3.8 million tonnes of production by
2019, at least 40 percent of which has been set aside for
LNG is a super-cooled form of natural gas that can be
shipped long distances without the need for a pipeline. Demand
for it is strong in Asian markets, where it fetches higher