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* BP leads Tangguh project
* Output to rise by 50 percent
* Building contracts worth almost $3 bln awarded (Recasts, adds BP, regulator comments)
By Osamu Tsukimori and Wilda Asmarini
TOKYO/JAKARTA, July 1 (Reuters) - BP gained finalinvestment approval to an $8 billion expansion of the Tangguhliquefied natural gas (LNG) project in Indonesia on Friday,clearing the way for a third train to start operations in 2020.
BP is going forward with expansion of Tangguh despiteannouncing it would rein back on spending this year due to weakoil prices. It also approved investment on an Egyptian gas fieldlast week.
The investment will boost annual LNG production capacity atthe Tangguh project in Indonesia's West Papua province by 50percent to 11.4 million tonnes.
Three-quarters of the gas from the new Train 3 will besupplied to Indonesian power utility Perusahaan Listrik Negara, BP said. The rest will go to Japan's Kansai ElectricPower Co.
Officials at Indonesia's upstream energy regulator SKKMigassaid the project was worth $8 billion, although BP declined toconfirm that figure.
"We are finalising details with potential lenders and atthis point I'm not able to disclose who they are," ChristinaVerchere, BP regional president Asia Pacific, told reporters.
In May BP cut its budget for the project to $8-10 billionfrom $12 billion.
"This final investment decision was made after confirmationwith Tangguh production-sharing contractors and is based oncommercial considerations," said Indonesian energy ministerSudirman Said.
BP leads the Tangguh project with a 37.16 percent stake. Itspartners include MI Berau, China National Offshore Oil Co and a venture between Mitsubishi Corp andInpex.
Friday's decision also sealed a $2.43-billion onshorebuilding contract for a consortium led by Tripatra, part ofIndonesia's Indika Energy Group, SKKMigas chief Amien Sunaryadisaid.
A $448-million offshore contract was awarded to theIndonesian unit of Saipem, he said.
"(These) are the contractors who did the front endengineering designs, so we hope the (results) aren't toodifferent from that," Sunaryadi said.
(Writing by Fergus Jensen; editing by Himani Sarkar and JasonNeely)
