Indonesia has indicated it may delay LNG delivery to China and South Korea from its $5bn Tangguh project, as the country struggles to obtain higher prices for the commodity product, a senior official at energy watchdog BPMIGAS is believed to have said recently.
Indonesia is the world’s second largest producer of liquefied natural gas (LNG) and closed its Tangguh LNG deals before the current escalation in oil prices, when prices of the cooled liquid gas were, in turn, much lower.
In the current climate however, the dynamics have changed and tight LNG supply, combined with the drive for cleaner fuel alternatives, has turned Asian LNG into a sellers’ market. Indonesia now wants to cash in, even though its exports are falling below contracted levels.
“We are renegotiating the price with LNG buyers from China and South Korea. We want a better price from what we have now. We want to change the pricing formula,” explained Edi Purwanto, Deputy Chief of BPMIGAS.
“If we cannot agree on a new price, then we might delay delivery from Tangguh. If needed, we are willing to pay a penalty until a new price has been agreed.”
Tangguh has contracts to supply 3.5 million tonnes per year to Sempra Energy, 2.6 million tonnes to China’s CNOOC and 1.1 million tonnes to South Korean buyers K-Power and POSCO
The BP-led Tangguh is expected to produce 7.6 million tpy from two trains at the project, located around 3000km east of Jakarta.