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tate electricity firm PT Perusahaan Listrik Negara (PLN) will receive around 1 million metric tons of liquefied natural gas (LNG) per year from British oil and gas giant BP plc’s Tangguh plant in West Papua for two decades starting in 2013.

PT PLN president director Nur Pamudji said in an email that on Wednesday, the company and BP had signed the head of agreement (HoA) for talks on a long-term LNG Sales and Purchase Agreement (SPA) from the Tangguh plant.

Both PLN and BP have agreed to sign and execute the LNG SPA by mid-2013.

Under the agreement, PLN would receive a total of 23.96 million metric tons or 28 cargoes of LNG from 2013 to 2033 from BP to meet the supply of the planned gas-receiving terminal in Aceh — formerly Arun LNG plant — and the floating storage and regasification unit (FSRU) off West Java.

The Aceh terminal, currently under construction by state-owned oil and gas company Pertamina to supply power plants in Belawan, North Sumatra and Aceh, will get first priority in receiving one cargo of LNG per month.

However, if the terminal is not ready by mid 2013, PLN will use the LNG supply to meet the gas demand for the West Java FSRU, according to Nur.

“With the additional gas supply from BP, we’ll be able to save up to 50 percent on the production cost of electricity, particularly in our power plants in Java and Sumatra,” Nur said.

PLN would need at least 26 LNG cargoes in 2013 to meet the supply of the West Java FSRU, while the LNG supply from the Bontang LNG plant in East Kalimantan only totaled 22 cargoes, as previously reported by The Jakarta Post.

The government previously asked for 12 of the 42 LNG cargoes from Tangguh initially intended for export to US firm Sempra Energy to be reallocated for domestic consumers this year, but only two out of the 12 cargoes would be delivered to PLN.

The remaining 10 cargoes would be allotted to the fertilizer industry while the remaining 30 cargoes would be exported although it was still unclear who would receive them.

The US firm decided earlier this year not to take up its LNG allocation from Tangguh in favor of cheaper gas back home following the gas supply increase in the US.

Indonesia, one of the world’s largest LNG exporters after Qatar, is struggling to increase the utilization of gas and coal to fuel its power plants as the high usage of subsidized diesel is burdening the country’s state budget.

BP Asia-Pacific regional president William Lin told the Post via email that the LNG would initially be delivered from Tangguh’s existing Train 1 and 2 before the planned Train 3 could begin operations in 2018. “The signing of HOA underpins the Tangguh Expansion Plan of Development II for Train 3, which was fully approved by the Indonesian Government on Nov. 29, 2012,” Lin said.