Indonesian government urged to renegotiate foreign LNG contracts

Suara Indonesia news - The Indonesian Chamber of Commerce and Industry (Kadin) called
on the government to renegotiate its liquid natural gas (LNG)
sales contracts with a number of countries in an effort to help
strengthen its liquidity in the future.

"Kadin is calling on the government and the Upstream Oil and Gas
Regulating Body (BPH Migas) to initiate a renegotiation of its
LNG sales contracts with a number of countries," Chairman of
Kadin's Permanent Committee for Fiscal and Monetary Affairs,
Bambang Soesatyo, said in Jakarta on Sunday [7 Sep 08].

He said that since 2000 the government had [signed] 70 LNG sales
contracts with other countries. Of the 70 contracts, 50 had
experienced the same fate as that of the Tangguh contract with
Fujian Province, China. "It is only reasonable to renegotiate the LNG sales contracts
because the character of the market has turned to a sellers
market, where prices are set by sellers due to the upward trend
of oil prices," he said.

He said that the high world market price of oil had prompted
many countries to shift to gas, including countries which
imported LNG from Indonesia.

Soesatyo said that the renegotiations should be based on the
assumption of future oil prices.

"The oil price has dropped to USD 107 per barrel. The point
where the price will find its equilibrium should serve as a base
for our renegotiations," he said.

He said that many analysts had forecast the price equilibrium
point at USD 70 per barrel. LNG sales contracts made in the
2000s were generally based on a price between USD 23 and USD 30
per barrel.

"But the formulation of price in the renegotiations should take
into account the 2009 geopolitical considerations owing to the
fact that the United States will have a new president," he added.
Source: Antara news agency, Jakarta, in English 0000 gmt 7 Sep 08 (Admin4)

Source: BBC Monitoring Asia Pacific