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JAKARTA, May 10 (Reuters) - China National Offshore Company(CNOOC Ltd) , China's largest offshore oil andgas producer, will increase the price it pays for gas from BP'sTannguh project in Indonesia, the head of Indonesia's energyregulator said on Friday.
The existing 25-year supply deal, under which CNOOC shipsaround 2.6 million tonnes of liquefied natural gas (LNG)annually from Indonesia's West Papua province to China's secondLNG terminal in Fujian, was signed in September 2002.
Under this agreement, the gas price was linked to oil pricesand capped at $25 per barrel, and came to $2.40 per millionBritish thermal units (mmbtu). This was increased in 2006 butremained capped at an oil price of $38 per barrel and came toaround $3.35 per mmbtu.
"The president of CNOOC told the Energy and MineralResources Minister directly that they were ready to increase theprice," upstream oil and gas regulator SKKMigas chief RudiRubiandini said in a press release, referring to a meetingbetween Indonesia's energy minister Jero Wacik and CNOOCchairman Wang Yilin in Jakarta on Friday.
During the meeting the energy minister told CNOOC that itsgas contract was no longer at an acceptable market price, energyministry spokesman Susyanto said in a separate statement.
In contrast to CNOOC, Indonesia sells gas to Japan and SouthKorea for more than $16 per mmbtu and to domestic buyers for $10per mmbtu.
"If it's above $7 or $8 that would be pretty good comparedto now," SKKMigas spokesman Elan Biantoro told Reuters addingthat the government was targeting a revised gas sale price above$10 per mmbtu.
Along with BP, other Tangguh contract partners are MIBerau B.V. (16.30 percent), CNOOC Ltd. (13.90 percent), NipponOil Exploration (Berau), Ltd. (12.23 percent), KG Berau/KGWiriagar (10.00 percent), LNG Japan Corporation (7.35 percent),and Talisman Energy Inc (3.06 percent).
The Tangguh LNG project is Indonesia's third LNG hub andproduces around 7.6 million tonnes of gas each year, with plansin place to add another 3.8 million tonnes of production by2019, at least 40 percent of which has been set aside fordomestic use.
LNG is a super-cooled form of natural gas that can beshipped long distances without the need for a pipeline. Demandfor it is strong in Asian markets, where it fetches higherprices.
