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SBY assigns Mulyani to renegotiate Tangguh deal
Aiming to resolve the much-debated Tangguh gas deal with China, the government is setting up a team to be led by the Coordinating Minister for the Economy Sri Mulyani Indrawati to renegotiate the selling price
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Aiming to resolve the much-debated Tangguh gas deal with China, the government is setting up a team to be led by the Coordinating Minister for the Economy Sri Mulyani Indrawati to renegotiate the selling price.
The team will be directly supervised by Vice President Jusuf Kalla, President Susilo Bambang Yudhoyono said Thursday.
"The coordinating minister for economic affairs will name the members of a strong negotiating team in coordination with related technical ministers," the President said at a plenary Cabinet meeting here as reported by Antara.
"The Vice President will supervise the work of the team to determine a more realistic price and appropriate benchmarks."
The contract in question was signed in 2002 by the administration of then president Megawati Soekarnoputri.
The arrangement called for Tangguh field to begin supplying in 2009 liquefied natural gas (LNG) to China's Fujian province for 25 years.
Under the contract, the price of LNG had been pegged at US$2.40 per million British thermal units (mmbtu) without a mechanism to adjust to increases in crude oil prices.
The selling price has since been improved to $3.40, but still falls far below the current international LNG price of about $20.
Kalla last week called the deal the country's most devastating contract ever made, as the selling price was not tied to the movement of oil prices, defying the usual practice of gas contracts.
"If the purchase contract is not renewed and adjusted to the crude oil price of $120 to $140 per barrel, it will inflict big losses on the state," Yudhoyono said.
Yudhoyono said he expected the team members, soon to be named by Mulyani, to have high levels of integrity and to be free of conflicts of interests.
"If the renegotiation is successful and the government makes a decision later, then everything will be my responsibility as president," Yudhoyono said.
Mulyani said after the meeting that she guaranteed the team would work in a transparent manner.
"We will select names (of the team members) soon. There are quite few eligible candidates, but what's most important is that they possess the criteria the President mentioned: people of high integrity and free of conflicts of interests," she said.
The Tangguh field is about 90 percent completed and is expected to start producing at the end of this year or early 2009.
Tangguh is a massive project located in the Bintuni Bay area in Papua, where total proven gas reserves measure some 14.4 trillion cubic feet.
