State-owned Pertamina has signed a sales and purchase agreement with US-based Cheniere Energy for the supply of 16 million mt of LNG over 20 years, marking Indonesia's first gas import contract, the companies said.
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"It [is] a milestone for Indonesia, particularly Pertamina, as it is the first time LNG [is] purchased from an international supplier to meet Indonesia's energy demand. It will create a multiplier effect to support economic growth," Pertamina said in a statement Thursday.
Pertamina has agreed to purchase 0.8 million mt/year of LNG under the 20-year contract upon commencement of operations at Cheniere's Corpus Christi Liquefaction Project in Texas, the Houston-based company said in a statement late Wednesday, adding that LNG deliveries were expected to begin in 2018. The SPA provides a contract extension option of up to 10 years.
Cheniere's LNG will be supplied to Pertamina's Arun LNG storage and regasification plant as well as its central Java floating storage and regasification unit, both which are short in LNG supply, according to the statement.
Under the SPA, Pertamina will buy the LNG on an FOB basis at a price indexed to the monthly Henry Hub price plus a fixed component, Cheniere said. The LNG will be loaded onto Pertamina's vessels, it added.
The Corpus Christi Liquefaction Project is being designed and permitted for up to three trains, with aggregate design production capacity of 13.5 million mt/year of LNG. The project is nearing completion of the regulatory process and Cheniere is continuing to work towards finalizing additional commercial agreements.
"Pertamina ... is the first foundation customer for our Corpus Christi Liquefaction Project being developed in Texas," Cheniere's chairman and CEO Charif Souki said in the statement. "Indonesia has historically been one of the largest exporters of LNG and is now in the process of converting one of their export terminals into an LNG receiving terminal."
ARUN LNG PLANT, JAVA FSRU TO RECEIVE CHENIERE LNG
Pertamina is in the the process of converting its 33-year old Arun liquefaction plant -- Indonesia's first LNG export facility -- in Nanggroe Aceh Darussalam, Sumatra, into an LNG import and regasification facility to meet growing gas demand in Aceh and North Sumatra, Platts reported in November. The modification project, which is the world's first such conversion project, is scheduled to be completed in October 2014, with commercial operations targeted for January 2015. The modified Arun LNG storage and regasification terminal is designed to have a capacity of 400,000 Mcf/d, which equals 3 million mt/year of LNG.
The other facility that would receive Cheniere's LNG -- Pertamina's 3 million mt/year LNG floating storage and regasification plant offshore central Java is due to come online in 2016, after delays, Platts previously reported. Pertamina will be offering gas from the FSRU to industrial consumers in central Java, to state-owned power utility Perusahaan Listrik Negara's power plants in Java and for its own 125,000 b/d Balongan refinery in West Java.
Pertamina estimates that Indonesia's domestic gas demand will increase to 7.2 Bcf/d in 2025, particularly to meet gas demand from power plants in Java and Sumatra. The company will gradually adjust its gas and LNG business orientation to meet domestic demand while maintaining export contracts, according to the statement. The country's LNG exports for 2013 will likely fall by 13.8% to 274 LNG cargoes from an estimate of 318 cargoes due to declining production at aging fields.