U

pstream oil and gas regulator BPMigas urged state-run firm PT Pertamina to make sure there is adequate demand for gas from the planned floating liquefied natural gas (LNG) receiving terminal in Central Java before asking for an LNG supply from the government.

An expert staffer at BPMigas, Fathor Rahman, said that clarity over buyers of the receiving terminal’s gas was important because the agency had to ensure that the supply allocated for the terminal would be absorbed by Pertamina.

“If Pertamina can’t take and distribute the gas due to lack of demand from buyers, we have to sell the gas at the spot market whose price, in many occasions, is lower than that of long-term contracts,” he told reporters during a discussion at his office in Jakarta on Wednesday.

He continued that the spot market was highly uncertain. Thus, if Pertamina failed to absorb the allocated gas and the government had to sell it in the wrong time, such as when the demand for LNG was sluggish, the price could drop by between US$2 and $3 per million British thermal unit (MMBtu).

Currently, the domestic LNG price stands at between $11 and $12 per MMBtu. That price is for LNG sent to a floating receiving terminal built on Jakarta Bay, which will begin commercial operations in April.

As earlier reported, Pertamina eyed a 1.5-million-ton-per-annum (mtpa) LNG supply from the Bontang LNG plant in East Kalimantan to the Central Java terminal, also known as the floating storage and re-gasification unit (FSRU).

BPMigas revealed there was a possibility that the Tangguh LNG field in Papua could also deliver LNG to the receiving terminal. However, the agency demanded firm commitments from Pertamina’s buyers before seeking supply for the terminal.

“Pertamina also has to ensure that there will be no delay in the operation of the terminal, not like the one in Jakarta Bay,” said BPMigas spokesperson Gde Pradnyana.

He said that the operation of the FSRU in Jakarta Bay was delayed a month due to permission from the West Java governor came late.

Fathor said that Pertamina had claimed that the gas from the Central Java receiving terminal would be channeled to industries and the state power company’s PT PLN’s Tambak Lorok power plant in Semarang. But the power plant had received supply from the Kepodang gas field, which would start delivering gas in 2014. The Central Java FSRU is scheduled to begin operation in the first quarter of 2013 with a total capacity of 3 mtpa.

Separately, Pertamina spokesperson Mochamad Harun said that the Tambak Lorok power plant still needed additional gas supply from the FSRU despite the supply from Kepodang. The company’s subsidiary, Pertamina Gas (Pertagas), has also started the construction of a pipeline network, connecting Semarang and Cirebon, to channel the gas to various industries.