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BP signs $1.8B deal to start Tangguh LNG plant Company reaches agreement with Indonesia to extend leases for giant gas fields Allen Baker Petroleum News Contributing Writer
BP is going ahead with its giant Tangguh LNG project after reaching agreements with the Indonesian government to extend leases on the giant gas fields that will feed it, according to Asian press reports.
And Halliburton’s KBR unit said March 8 that its Indonesian unit and partners had received a $1.8 billion engineering and construction contract for the LNG trains and associated facilities. KBR’s partners are JGC Corp. of Japan and PT Pertafenikki Engineering of Indonesia. Saipem, a subsidiary of Italy’s Eni, will build the platforms and pipelines for the project.
The entire Tangguh development is expected to cost $5 billion or more, with a capacity to send out 7.6 million tonnes of liquefied natural gas each year, starting in 2008.
The big stumbling block was resolved when BP reportedly received license extensions to 2035 for three gas fields that will supply the LNG plant.
Novian Thaib, a director at Indonesia’s Mines and Energy Ministry, told Reuters the extensions were approved March 4 for the Wiriagar, Muturi and Bereau fields, which contain more than 14 trillion cubic feet of natural gas. The licenses for Berau had previously expired in 2017, while Wiriagar was good through 2023 and Muturi through 2022.
But the London-based BP was reluctant to proceed without guaranteed supplies through 2035. It has major supply contracts with Korean, Chinese and American customers that run through that year for essentially all of the project’s capacity. Sempra supplier In October, the company signed a 20-year deal with Sempra Energy of California to deliver up to 3.7 million tonnes annually to the LNG terminal now being built near Ensenada on Mexico’s Baja Peninsula, about half the capacity both at the terminal and at Tangguh. That deal gives BP a good deal of latitude to divert LNG cargoes to other destinations as market conditions change, BP executives said.
Other long-term deals will send 2.6 million tonnes annually to China’s Fujian province, 600,000 to 800,000 tonnes a year to K-Power of South Korea, and 550,000 tonnes annually to Posco, also of South Korea.
BP’s development partners at Tangguh are China’s CNOOC and Japanese firms including Mitsubishi, Sumitomo and Kanematsu. BP holds a 37 percent share of the fields. The LNG plant will be in Papua province, about 1900 miles east of Jakarta, Indonesia’s capital.
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