Tangguh field first LNG cargo sails to S. Korea soon

Alfian ,  The Jakarta Post ,  JAKARTA   |  Sat, 07/04/2009 11:03 AM  |  Business

After delays due to last-minute technicalities and  price, Papua’s massive Tangguh project will ship its first Liquefied Natural Gas (LNG) cargo bound for South Korea as early as this Saturday, a senior ministry official says.

The Energy and Mineral Resources Ministry now expects that the first Tangguh LNG cargo could be shipped as early as this Saturday, Oil and Natural Gas Director General Evita Legowo said in Jakarta on Friday.

“The filling process usually only takes about 12 hours, but this   time we are handling it extremely carefully because this is the first [time] for the plant. I have got the information that the shipping could be as early as Saturday night,” Evita said.

Located in the Bintuni Bay area in remote Papua, the Tangguh project is exploiting a total of 14.4 trillion cubic feet of proven gas reserves.           

In 2002, president Megawati Sukarnoputri signed a deal to supply LNG from Tangguh to China’s Fujian province, in a contract drawing  strong criticism over its initially low prices, pegged at US$2.40 per million British thermal units (MMBTU), not indexed to and regardless of increases in crude oil prices.

The selling price was later improved to $3.40 per MMBTU,  but the present government was still unhappy  with the deal.

Evita said the vessel would ship 136,000 cubic meters of LNG to South Korean steel maker POSCO.  

The Indonesian subsidiary of BP, the operator of the project, has signed a 20 years LNG purchase agreement with Korean companies POSCO and K-Power for a total of 1.15 million tons of LNG per year. BP and its partners also signed a 25-year contract to supply 2.6 million tons per year of LNG to CNOOC for China’s Fujian LNG terminal.

The Tangguh project also has further signed a flexible contract to supply up to 3.7 million tons of LNG per year to the Sempra LNG terminal in Baja California, Mexico.

Purnomo said earlier that Tangguh LNG was initially destined for Fujian, China, but “The LNG receiving terminal in Fujian is not ready yet.” Thus it was diverted to Korea. It is not yet clear yet when the shipment to Fujian will be started.

Purnomo Yusgiantoro also commented on the revision of the plan to build a floating LNG plant in Masela gas block, in deepwater off the Arafura Sea, Maluku (replacing this with a pipeline to a nearby island).

“Earlier we thought it wouldn’t be feasible to transport natural gas from the block to a nearby island, because strong currents could destroy the pipeline. But, a new study indicates the pressure on the pipeline can be reduced by adjusting the pipeline design to follow the curve of the basin,” Purnomo said, adding that similar technology had been used in other countries.

The government had previously approved in principle a proposal from Japan’s Inpex Corporation, the sole operator of the block, to build an expensive and challenging $19.6 billion floating LNG plant.
Evita Legowo said that the new pipeline technology would reduce costs. “The initial study shows this [new] technology only requires one quarter of the investment compared to floating storage,” she said.

But the government said it would make final decisions after a more comprehensive study was done
The Abadi field in the Masela block is estimated to hold reserves of 10 trillion cubic feet of natural gas, making it the second-biggest gas field after the Tangguh project in Papua.

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