President appoints team to renegotiate gas contracts

President Susilo Bambang Yudhoyono has appointed a team to renegotiate all gas contracts from the Tangguh plant in Papua which could result in state losses due to a failure in the pricing formula.

Coordinating Minister for the Economy Sri Mulyani Indrawati will be in charge of assembling and managing the team, while Vice President Jusuf Kalla will be responsible for supervising the negotiations.

"If the contracts are not negotiated the country will suffer great losses. We must fight for this, with the clearest intentions, for the good of the state," the President said after a Cabinet meeting at the State Palace on Thursday.

The President said Kalla had made the first big step toward negotiating the contracts during his visit to China by informing Beijing about the matter.

"The vice president visited China and opened the door for negotiations. God willing there is a way out," he said.

In 2002, the Megawati administration signed a deal to supply LNG from Tangguh to China's Fujian province for 25 years with the gas price pegged at US$2.40 per million British thermal units (mmbtu) regardless of any increase in market prices, which currently at
about $20 per mmbtu.

Other contracts with other consumers of gas from the Tangguh plant, which include Sempra of the United States, Posco and SK Power of South Korea, use a price that is pegged to the market fluctuations of the crude oil price. (and)