RI may earn $6b in revenue from Senoro LNG plant

[ The Jakarta Post ]
Ika Krismantari, Jakarta

The government is projected to earn up to US$6 billion in revenue under a 15-year production split scheme for the LNG plant in Senoro, Central Sulawesi, a source close to the deal says.

The revenue is based on a production split arrangement, under which the government will gain 85 percent, while the Senoro block operators -- state oil and gas firm PT Pertamina and Medco Exploration and Production (E&P) -- will gain 15 percent, Medco E&P president director Lukman Mahfoedz said Tuesday.

The plant uses a complicated downstream business structure, under which the gas producers -- Pertamina and Medco -- will sell the gas to LNG plant owners Pertamina, Medco and Japanese firm Mitsubishi, who will then sell the liquefied gas to third parties.

The LNG plant is 51 percent owned by Mitsubishi, 29 percent by Pertamina and 20 percent by Medco.

Lukman said construction of the LNG plant, designed to produce a total capacity of two million tons per annum, could begin in the first quarter next year.

Construction costs are estimated at around $1 billion, with the plant expected to start production in the second quarter of 2011.

It was earlier reported that gas from the LNG plant would be exported to Japan despite increasing domestic demand, according to Pertamina vice president director Iin Arifin Takhyan.

The fact that a Japanese company, Mitsubishi, is involved in the Senoro LNG project as a majority shareholder supports the idea LNG from the plant would be shipped there, Iin said.

Japan, one of the country's biggest gas buyers, is hoping Indonesia will continue to supply LNG.

Japan reportedly demanded the continuity of Indonesia's gas exports in the economic partnership agreement (EPA) recently signed between the two countries.

However, Indonesia will only be able to commit an export total of three million tons per year after the current contracts end in 2010.

Under existing contracts, Indonesia supplies 12 million tons of LNG a year to Japan.