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Purnomo blames LNG debate on politicking

Politics, rather than substance, has played a major role in the hot debates over a 2002 contract calling for gas export from the massive Tangguh field in Papua, a minister says

Alfian (The Jakarta Post)
Jakarta
Wed, August 27, 2008

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Purnomo blames LNG debate on politicking

Politics, rather than substance, has played a major role in the hot debates over a 2002 contract calling for gas export from the massive Tangguh field in Papua, a minister says.

Energy and Mineral Resources Minister Purnomo Yusgiantoro himself is quite familiar with the liquefied natural gas (LNG) deal, as he held the same post when serving under then president Megawati Soekarnoputri.

Far from taking any blame, Purnomo said he saw nothing wrong with the contract.

"I have checked all the procedures and finally reached the conclusion that there is nothing in the Tangguh contract except politics. I hope our oil and gas sector will not be affected by political posturing," said Purnomo during his speech at a business discussion Tuesday.

A massive project, Tangguh is exploiting gas fields in the Bintuni Bay area in Papua, where total proven gas reserves tally some 14.4 trillion cubic feet.

In 2002, the administration of Megawati signed a deal to supply LNG from Tangguh to China's Fujian province in a contract that drew heated criticism over the low prices.

Vice President Jusuf Kalla was the latest to join this block, last week calling the 25-year-deal "the most devastating contract ever made and the worst," adding that it would lead to huge losses once export began next year.

Under the contract, according to Kalla, the price of LNG had been pegged at US$2.40 per million British thermal units (mmbtu) regardless of any increase in crude oil prices. Both governments have been in talks to renegotiate the deal.

For a comparison, the international LNG price is about $20 per mmbtu at present.

Kalla has further demanded a House of Representatives oil and gas inquiry team to investigate the contract.

Many see this development as a war of chest between Golkar, the nation's largest party, which Kalla chairs, and Megawati, who heads the second largest party, the Democratic Party of Struggle (PDI-P), which offers the stiffest opposition to the government.

In response, Megawati said that since Kalla once served as a minister in her Cabinet, then he should share the blame for every finger pointed at her and her ministers.

Purnomo seems trapped in the political battle as he is the energy minister under both the current administration and Megawati's.

Asked about the war of words between Kalla and Megawati and suggestions that he too is responsible for the deal, Purnomo refused to comment, but did say that when the contract was signed, he did not see anything wrong with it.

As for the price, he said it was probably cheap because it was a buyer's market at the time.

"Before signing a contract with Fujian, the gas from Tangguh had failed in three previous tenders. The price was in that range because buyers controlled the market at that time," he said.

Moreover, he said, the gas price then was not comparable to that of present time. "The production cost was also very low at that time. It wasn't, (Tangguh operator) BP would have refused to sign the contract."

The field is expected to start producing at the end of this year or in early 2009.

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