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BP’s Indonesia LNG project may expand Agreement with government sets stage for a $12B third train at Tangguh, with a sizeable share of gas committed for local use Wesley Loy For Petroleum News
BP has won Indonesia’s approval for a potential $12 billion expansion of the Tangguh liquefied natural gas project.
The expansion would involve developing a third liquefaction train for Tangguh, located in Papua, which is the western half of the huge island shared with Papua New Guinea.
Indonesia’s Ministry of Energy and Mineral Resources, along with the country’s regulatory body for oil and gas upstream activities, approved in principle the “plan of further development” for Tangguh, BP said.
The approval was announced Nov. 1 in London by British Prime Minister David Cameron, following a bilateral meeting with Indonesia President Susilo Bambang Yudhoyono. BP’s chief executive, Bob Dudley, and other company executives attended the meeting.
The agreement on the expansion “is great news for BP, one of the largest foreign investors in Indonesia,” Cameron said in a press release from BP. “It’s a huge boost to the UK’s growing trade and investment in Indonesia’s emerging market.”
The deal includes significant provisions to supply energy to Indonesia villages and industry.
Tangguh’s history BP Indonesia operates Tangguh as contractor to Indonesia’s oil and gas regulatory body, known as BPMIGAS.
BP holds a 37.16 percent interest in the project. Other Tangguh contract partners are MI Berau B.V. (16.3 percent), CNOOC Ltd. (13.9 percent), Nippon Oil Exploration (Berau) Ltd. (12.23 percent), KG Berau/KG Wiriagar (10 percent), LNG Japan Corp. (7.35 percent) and Talisman (3.06 percent).
The government of Indonesia in 2005 gave the go ahead for the Tangguh LNG project in Bintuni Bay of West Papua. The site is several hours by air east of the Indonesian capital of Jakarta.
The project takes its name from the Indonesian word for “resilient and strong.” It involves tapping six fields with proven gas reserves of more than 14 trillion cubic feet. Gas is piped from offshore production platforms in Bintuni Bay to an onshore processing plant. The LNG is then shipped out aboard specialized tankers.
Tangguh LNG began operations in mid-2009. The project has long-term contracts with four customers in China, Korea and Mexico, BP says.
Gas for locals BP in early September submitted the plan for development of a third train. A train is a unit that purifies and liquefies gas.
“Approval of the plan is an important step in preparation for the final investment decision for this expansion, which is currently expected to be taken in 2014,” BP said. “This would potentially enable commissioning operations for the new train to begin in late 2018.”
The third train would boost liquefaction capacity by a third, to 11.4 million tons annually, BP said.
Train 3 is expected to cost Tangguh project partners up to $12 billion.
The expansion plan includes a number of provisions for supplying Indonesia itself with more energy.
BP and its partners have agreed to sell and supply 40 percent of the LNG output from Train 3 to Indonesia’s state electricity company, BP said.
“In addition, as part of the plan up to 15 million standard cubic feet a day of piped gas, supplied from the Tangguh fields and sufficient to generate up to 50MW of local power, would be allocated for sale from the date of the Train 3 start-up,” BP said. “This would supply and enable local infrastructure and commercial business as well as stimulate light industrial development, particularly in the North Shore villages of Teluk Bintuni Regency and beyond.”
BP said tendering would now begin for the front-end engineering and design, or FEED, services for the proposed Train 3 development.
The company noted, however, that further regulatory and partner approvals are required before the final investment decision for Tangguh expansion is made.
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