Indonesia - BP Is Close To Funding Tangguh LNG Export Venture.

BP is currently in negotiations for a $3.4 billion loan to finance its Tangguh LNG project in Indonesia's Papua province. Tangguh, deep in the remote eastern end of the Indonesian archipelago, will produce 7.6 million tons/year of LNG from two trains, with the first train expected in the fourth quarter of 2008.

Last week BP Indonesia Vice President Budiman Parhusip said: "We are confident that going into 2006, we will close one by one with lenders. We are talking to quite a few. These discussions are going on simultaneously". He said BP was in talks with the Asian Development Bank (ADB). The Japan Bank for International Co-operation (JABIC), a consortium of Chinese banks, and commercial banks in Europe and Asia. "We are in the process right now of discussing the terms and conditions of the loan and the amount of the loans. Right now we can't disclose", Parhusip said.

BP gave the go-ahead for its multi-billion dollar Tangguh LNG project in March 2005, signing engineering contracts after the Indonesian government granted a licence extension for related gas fields as Tangguh is an integrated mega-venture.

For Indonesia, the world's biggest supplier of the super-cooled gas, the project will help offset declining output from other LNG facilities and provide much-needed revenue. The overall project is expected to cost around $5.5 billion including associated upstream development, construction of the two LNG trains and marine infrastructure to bring gas from an offshore field operation.

Tangguh will take gas from the Wiriagar, Muturi and Berau blocks, which together have combined reserves of 14.4 TCF. BP is the operator of all three blocks. BP's partners in Tangguh are the state-owned CNOOC of China, as well as several Japanese firms including Mitsubishi, Inpex and Kanematsu. The project, 3,000 km east of Jakarta, already has LNG supply contracts with China, the US market through a terminal being built in Mexico and South Korea. Indonesia has been struggling to meet its contractual LNG sales commitments as gas output has declined and supply has been diverted to the domestic market, mainly to fertiliser plants (see survey of Indonesia in Vol. 64, Nos. 9-12).