NGI The Weekly Gas Market Report / NGI All News Access

BP's Tangguh LNG Project in Indonesia Picking Up Steam

A BP affiliate has awarded a $1.8 billion engineering, procurement, construction and commissioning contract for its Tangguh liquefied natural gas (LNG) project in Indonesia to a group including KBR subsidiary PT Brown & Root Indonesia, JGC Corp. of Japan and PT Pertafenikki Engineering of Indonesia. The contract signing came a week after BP signed an agreement for the $5 billion project with the Indonesian government.

The Tangguh plant will be located in the easternmost province of Papua and will supply a total of 7.6 million metric tons of gas a year to customers in South Korea, China and North America. It is the largest capital development project currently under way in Indonesia. It will include two production trains, each with 3.8 million metric tons/year of capacity.

The construction contract was won following a competitive bidding process in March 2003. "The bidding structure for the Tangguh project allowed us to extensively optimize the project to reduce costs, maximize the local content, decrease the environmental impact, lessen the execution risk and maintain the overall operability and maintainability of the project," said Lou Pucher, senior vice president of KBR's energy and chemicals division.

The work scope includes development of extensive infrastructure at the site including marine facilities, product storage, utility support systems, and housing and administrative facilities for the plant staff. The project is expected to begin producing LNG in 2008, with initial product shipments to China, South Korea and the North American West Coast.

A significant portion of the LNG will be shipped to Sempra Energy's 1 Bcf/d Energy Costa Azul LNG terminal in Baja California Norte, Mexico, which is expected to begin service in 2008. Sempra and partner Royal Dutch Shell signed a 20-year LNG supply agreement with BP last fall for up to 3.7 million tons of LNG (about 500 MMcf/d of regasified LNG) from the Tangguh project. Shell also anticipates bringing LNG to the Mexican terminal from its Sakhalin II project in eastern Russia. At least half of the LNG from the Mexican terminal will go to markets in the United States.

BP's partners in the Tangguh Project are MI Berau B.V. (Mitsubishi and INPEX Corp.); CNOOC Ltd.; Nippon Oil Exploration Berau; KG Co. (held by Japan National Oil Corp., Kanematsu Corp. and Overseas Petroleum Corp.); and LNG Japan Corp. (held by Sojitz Corp. and Sumitomo Corp.).

©Copyright 2005 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.