Britain's Prime Minister David Cameron and Indonesian President Susilo Bambang Yudhoyono announced Thursday a $12.1 billion deal for BP, which will allow the company to enlarge its footprint in Indonesia's liquefied natural gas (LNG) market.
The public acknowledgement means that Indonesia's Ministry of Energy, together with oil and gas executive agency BPMigas have approved, in principle, the expansion plans drawn up for the BP-operated Tangguh LNG project in Papua Barat province, eastern Indonesia.
Indonesia's approval should come as no surprise to industry watchers given the government's open support towards the development of the Papua region and the natural gas industry.
McKinsey Global Institute said in a country report published in September this year stated that sector-specific reforms in areas such as Pupua and Sumatra are high up on the Indonesian government's agenda given the fact that these areas have vast amounts of untapped resources.
The expansion will add a third 3.8 million tonnes per annum (mtpa) LNG train to the existing project, bringing Tangguh's total capacity to 11.4 mtpa. BP said in a statement that a final investment decision on the plan – subject to further regulatory and partner approvals – is expected in 2014. If taken, the new train will start operations in 2018.
BP and its partners in the Tangguh project will now start tendering for the front-end engineering and design (FEED) services for the proposed Train 3 development.
Under the terms of the plan, BP and its partners have agreed to sell and supply 40 percent of the LNG output from the proposed third train to Indonesia’s state electricity company PT PLN (Persero) for the Indonesian domestic market.
Tangguh is operated by BP Indonesia as contractor to BPMigas. BP holds a 37.16 percent interest in the project, while the remaining stakes are held by MI Berau B.V (16.30%), CNOOC (13.90%), Nippon Oil Exploration (Berau) (12.23%), KG Berau/KG Wiriagar (10.00%), LNG Japan Corporation (7.35%), and Talisman (3.06%).
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