Indonesia Confident on Winning Guangdong Gas Project

Indonesia appears confident of success in its bid for a $10 billion deal to supply China's southern Guangdong Province with liquefied natural gas (LNG). The final round of bidding will start on April 19 and Indonesia hopes China will opt for gas from the offshore Tangguh field in the eastern Indonesian province of Papua. "Indonesia is very optimistic about the bid," said Indonesian Minister of Energy and Mineral Resources Purnomo Yusgiantoro. The minister is accompanying Indonesian President Megawati Soekarnoputri on her current visit to China.

The Guangdong liquefied natural gas project is seen as a powerhouse for propelling the development of the Tangguh project now under construction, which will be Indonesia's third LNG center. Despite the huge potential benefits to the Southeast Asian country and its energy industry, the bidding is only the tip of the iceberg in the increasing economic interests between China and Indonesia.

Megawati arrived in Beijing and met President Jiang Zemin on Sunday as part of a four-day visit to promote trade and co-operation with China. On the same day, the two sides signed co-operative agreements in the areas of energy resources, petroleum and infrastructure construction. Pertamina and PetroChina also agreed to form a partnership. At the end of January, the China National Offshore Oil Corp. the country's third largest oil company and also the Guangdong project's major Chinese backer - short-listed three potential overseas suppliers to feed the nation's first LNG receiver terminal in Guangdong with 3 million tons of LNG a year for 25 years. The two other short-listed firms are Australia LNG, which will sell its gas from Western Australia's North West Shelf, and Qatar's Ras Laffan Co, which plans to market its gas from the Middle Eastern country's North Field. The final decision is expected to be announced by the middle of this year.

Purnomo said: "Indonesia has always been trying to do its best to win the contract." He added that Indonesia holds three competitive advantages for the final round of competition. According to Purnomo, the Tangguh project boasts below-average infrastructure and operational costs as a result of its protected shallow waters, the proximity of the gas fields to the plant site and its excellent reservoirs of 18.3 trillion cubic feet (0.52 trillion cubic meters) of independently certified proven and probable reserves, with an additional 5.4 trillion cubic feet (0.15 trillion cubic meters) of possible reserves already identified. Proximity to its potential market is another merit of the Tangguh project. The gas field is 1,900 nautical miles (3,520 kilometers) from Guangdong Province, closer than either of the other two competitors. The minister said his country's third advantage was security of gas supply since Indonesia already operates two LNG plants - one in Arun in Sumatra and another in Bontang, Kalimantan. In case of an emergency in Tangguh, the gas supply would still be ensured via the two other supply facilities.