Indonesia in talks with BP on gas field extensions

BP Plc is negotiating with Indonesia to extend contracts for natural gas blocks that will supply LNG plants at its Tangguh project in Papua province, Mines and Energy Minister Purnomo Yusgiantoro said on Monday.
"If we extend the contracts we have to agree terms and conditions which are better for the Indonesian government," Purnomo told reporters without elaborating.
"BP wants the contracts extended because their gas block contracts will expire before their LNG contracts to supply buyers finish. The government and BP is still negotiating the conditions."
BP plans to build two liquefied natural gas plants as part of the Tangguh project in Papua. Lukman Mahfoedz, BP vice president for Tangguh LNG, separately said on Monday, the plants would have a combined capacity of around 7.6 million tonnes per year.
The LNG plants will get natural gas feedstock from the Wiriagar, Muturi and Berau blocks, which together have combined reserves of 14.4 trillion cubic feet (tcf). BP is the operator of the three.
An official at the Mines and Energy Ministry said the contract for Wiriagar would expire in 2023, Muturi in 2022 and Berau in 2017.
The $5 billion Tangguh project, 3,000 km (1,880 miles) east of Jakarta, already has LNG supply contracts to China, the United States, Mexico and South Korea. Start up is slated for mid-2008, although some sales agreements run from 2006.
BP has said it expected to make a final investment decision on the project by the end of the year.
Purnomo said he had asked BP to look into the possibility of other gas reserves in Papua which, together with those proven at Tangguh, could bring the total to around 28 tcf.
"Tangguh has reserves of 14.4 tcf but there are other reserves there that could reach 28 tcf. However, the reserves need to be verified. I have asked BP to look into gas reserve development that could meet growing LNG demand in the future," Purnomo said.
Indonesia, the world's biggest supplier of the super-cooled and compressed gas, has been struggling to meet its contractual commitments as gas output has declined and supply has been diverted to the domestic market, mainly to fertiliser plants.
The Southeast Asian country plans to export about 25 million tonnes of LNG this year to Japan, South Korea and Taiwan from its two export centres at Arun in Aceh province in Sumatra and Bontang in East Kalimantan.