Indonesia to extend LNG supply deal with Japan

Indonesian government plans to sign the heads of an agreement (HoA) by the end of this month with Japanese buyers to extend an existing liquefied natural gas (LNG) supply contract of 6 million metric tons per annum that expires in 2010.

The pricing formula for the LNG cargoes produced by the LNG plant in Bontang, East Kalimantan, has been agreed upon, The Jakarta Post newspaper reported Wednesday.

Prices will be based on the Japanese cocktail crude price.

"The Japanese buyers are also interested in extending the contract of another 6 million metric tons a year from Bontang," Kardaya Warnika, chairman of Upstream Oil and Gas Regulatory Agency (BP Migas), was quoted as saying.

"We have not made any decisions yet on this request. The gas resources in the area are finite."

Japan, which is Indonesia's largest LNG purchaser, has a contract for 12 million metric tons of the fuel annually from Bontang. The buyers in Japan had previously requested lower prices for the contract extension.

"We are asking for a suitable price, considering that oil prices have stayed above 40 US dollars per barrel," BP Migas deputy of marketing and finance Eddy Purwanto said.

LNG prices have a strong correlation to oil prices.

Indonesia, the world's largest LNG exporter, has been forced to reduce LNG shipments for next year by 10 percent due to lower production from the aging gas fields in East Kalimantan and Nanggroe Aceh Darussalam, where the Arun plant is located.

Source: Xinhua