SBY, Kalla blame Megawati for low prices of Tangguh LNGs

The Jakarta Post ,  Jakarta   |  Thu, 08/28/2008 5:21 PM  |  Business

The President and the vice president have denied a statement by former president Megawati Soekarnoputri that they were involved in the decision to sell LNG from Tangguh, West Papua, to China at a low price.

"Don't spread news that will only confuse people. That SBY and JK were involved in setting up the price is not true," President Susilo Bambang Yudhoyono said while attending the Cabinet meeting.

Yudhoyono has decided to form a team, led by Coordinating Minister for the Economy Sri Mulyani, to renegotiate the LNG sales contract with China.

Kalla said that it was Megawati herself who wanted a low price for Tangguh LNG.

"We were not involved in the discussion. At that time, we were coordinating ministers for security and people's welfare. We did not want to interfere in her affairs," Kalla said.

Under Megawati's administration, Yudhoyono was coordinating minister for security, while Kalla was coordinating minister for people's welfare.

Earlier, Kalla said the Tangguh LNG sales contract was the worse contract ever signed by the Indonesian government.

The price stipulated in the 20-year contract was just too low, at US$3.3 per million British thermal units (mmbtu), compared to the current market price of US$20 per mmbtu.

Kalla went to China last week and sought a renegotiation of the contract. (rid)

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Irnandas (not verified) — Wed, 09/03/2008 - 6:07pm

Instead of commenting to other people's fault, the best thing to do right now is sourcing out any possible solutions to this matter. I think the best approach right now is trying to renegotiate the price with China. Of course there is a risk of China will reject the new proposal, but that's the fact that if it comes true, then we will have to live with it.
Parallel to renegotiation, perhaps we can also search out any other prospective buyers that are willing to purchase our gas with quite competitive price. This alternative shall be followed with production expansion so that Tangguh can also fulfill the demands from new buyers.

Armu itfei (not verified) — Tue, 09/02/2008 - 12:06pm

I am with the VP on this issue, Mega have made such blunder to make such weak, naive, contract with china. I believe that the contract it self should protect both side but mega waive the common contractual clause. So it is obvious that she again have fail her people, just like what happened on Indosat case, The Tanker case, and so many blunder she has made.

Harry C. (not verified) — Fri, 08/29/2008 - 12:44pm

This case is casual in business world.

Seeking renegotiation of the contract is the surest way to lose world's confidence on Indonesia.

Except there is a point in the contract which stipulate renegotiation, I'd say the government should honour the contract, for the sake of one's honour and saving confidence.

What if Indonesia put itself in China's shoes (eg.Indonesia is the buyer and China is the supplier) and same case happens?

What if the price is now actually lower than agreed in the contract?

Does this case represent on how our 'businessman' VP does business? I personally think so.

Irfan (not verified) — Fri, 08/29/2008 - 8:20am

Why LNG price from Tangguh was low sold to Cina. When we back at the time, the condition was not same with current situation. In selling LNG was so competitive, many gas producers competed each other look for buyer.

At that time, Tangguh's LNG price likely reasonable. Oil price was not as high as like now. So let me look this problem wisely and without blame each other.

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