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BP upbeat over selling Train 3 gas despite projected glut
Dharmawan H
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Dharmawan H. Samsu: (JP/Ricky Yudhistira) (JP/Ricky Yudhistira)
Dharmawan H. Samsu: (JP/Ricky Yudhistira)
BP Indonesia is optimistic about securing customers for its liquefied natural gas (LNG) produced by Train 3 at its Tangguh plant in West Papua.
BP Indonesia country head Dharmawan H. Samsu said on Tuesday that the company did not foresee any difficulties in marketing Train 3 gas as the Tangguh plant expansion was running to schedule. This was despite the possibility of an oversupply in the international market due to numerous global projects that were set to boost output.
'We have a golden opportunity with Train 3 being on time because there are many projects overseas that may see delays,' he said during a visit to The Jakarta Post's office.
BP Indonesia is the operator of the Tangguh LNG area, with 37.16 percent ownership. BP Indonesia is currently expanding its Tangguh plant by adding a new train, called Train 3, with a production capacity of 3.8 million tons of LNG per year.
Tangguh currently runs two trains with a combined operating capacity of 7.6 million tons.
The Train 3 expansion project is costing BP Indonesia US$12 billion and is expected to contribute $9 billion to state revenue, according to Dharmawan.
Currently, billions of dollars worth of LNG projects worldwide are under way and most aim to sell the gas to the Asian market.
The capacity of the proposed North American LNG terminals will be more than triple the estimated demand in Asia by 2020, according to figures by HSB Solomon Associates LLC's Ziff Energy Group as quoted by Bloomberg. LNG production in the US will be about 9 billion cubic feet per day, or 15 percent of the global LNG market by 2020, according to Freeport LNG Development LP chief executive officer Michael Smith as quoted by Bloomberg.
Freeport LNG is currently building an export facility in Texas.
Given the many projects in the pipeline, analysts have estimated that the liquefaction facility boom may start lowering fuel prices in Asia after 2016, when some of the projects in the US go on stream.
The plan to develop Tangguh's Train 3 was approved in 2012.
The company is currently working on the project's environmental impact study and the front end engineering design (FEED).
It expects to announce the winner of the FEED tender soon.
It aims to achieve a final investment decision in 2015 and start its first commercial operations in 2019.
BP Indonesia plans to allocate 40 percent of the gas produced by Tangguh's Train 3 to the domestic market and the remaining 60 percent to customers overseas.
State-owned electricity company PT PLN will absorb 40 percent of Tangguh Train 3 gas production.
Dharmawan said the two companies were working to finalize the gas sale and purchase agreement.
'We hope to finalize the agreement within a month,' he said.
Dharmawan added that the company needed to conclude the deal with PLN before moving on to securing buyers for Tangguh Train 3's overseas deliveries. The Upstream Oil and Gas Regulatory Special Task Force's (SKKMigas) deputy head for commercialization control, Widhyawan Prawiraatmadja, said Japanese Kansai Electric would likely become one of the Tangguh Train 3 overseas buyers.
'All Train 3 production will amount to 3.8 million tons. As much as 1.5 million will be absorbed by PLN, 1 million tons by Kansai and we're still looking for buyers for the remaining output,' he said.
'It could be for domestic use, too,' he added.
