Tangguh Partners Ink LNG Sales Deal with Posco

BP announced today, in the presence of BPMIGAS, the Indonesian Oil & Gas Regulatory Agency, that the partners in the Tangguh liquefied natural gas (LNG) project in Indonesia have signed a sales and purchase agreement with Posco, the world's second largest steel maker. The agreement involves the supply of 0.55 million tons of LNG per annum for a period of 20 years.

Posco is currently building an LNG import terminal at Gwangyang in South Korea that will re-gasify the LNG to be supplied. Posco has two gas-fired power plants with a total generating capacity of 845MW at their steel mills in Pohang (345MW) and Gwangyang (500MW).

The sales and purchase agreement completes the process outlined in the Heads of Agreement between Posco and the Tangguh partners signed on July 25, 2003.

At the signing ceremony in Bali today, Anne Quinn, Group Vice President of BP's Gas, Power & Renewables business, said: "This agreement represents the first sale of LNG to the private sector in South Korea and has been achieved with the strong support of BPMIGAS and the Government of Indonesia. It is an important step for the Tangguh project which is making excellent progress towards a Final Investment Decision later this year."

The Tangguh project's bid was chosen in competition with five other international LNG supply sources. A second sales and purchase agreement for up to 0.8 mtpa with KPower of South Korea (a joint venture of SK and BP) is also currently being finalised following the outcome of this bid process.

The Tangguh Project is targeting a two-train start-up development. The project has already secured an LNG sales contract for 2.6 million tons per annum for the Fujian LNG project in China and is finalizing an agreement with Sempra for the supply of 3.7 million ton The Tangguh LNG project is located in the Berau-Bintuni Bay region of Teluk Bintuni Regency, in the Indonesian province of Papua (formerly called Irian Jaya). The project is operated by BP Indonesia, which holds a 37.16% stake in the project, as a PSC contractor to the regulator, BPMIGAS.

BP's partners in the Tangguh Project are CNOOC Ltd – 16.96%; MI Berau B.V (held by Mitsubishi Corporation and INPEX Corporation) – 16.30%; Nippon Oil Exploration Berau – 12.23%; KG Companies (held by Japan National Oil Corporation, Kanematsu Corporation and Overseas Petroleum Corporation) – 10.0%; and LNG Japan Corporation (held by Sojitz Corporation and Sumitomo Corporation) – 7.35%

The Tangguh gas fields contain 14.4 tcf of natural gas reserves certified as proved by DeGolyer & MacNaughton. The planned LNG processing plant will be able to produce over seven million tonnes of LNG per annum from two initial processing trains.