The future of a major Indonesia to Mexico export-import project to liquify, transport and regasify natural gas for the West Coast of North America seemed assured Tuesday with the signing by Sempra and BP affiliates of a 20-year agreement for gas from the proposed BP Tangguh LNG Project in Indonesia to supply about half of the 1 Bcf/d going into the jointly owned Sempra-Royal Dutch Shell receiving terminal at Costa Azul, Mexico. The project has the blessings of the governments of the United States, Mexico and Indonesia. Shell will be supplying the other half of the gas.

BP and Sempra in a joint announcement said up to 3.7 million tons of LNG, or an average of 500 MMcf/d, will be delivered to the North Baja coastal terminal from the Indonesian LNG project, beginning in 2008, representing the first long-term Asia-Pacific LNG supply coming to North America. The deal involves BP and its Tangguh project partners, Sempra Energy LNG, and the Indonesian oil/gas agency BPMIGAS (Badan Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi). Shipping via BP is included in the agreement, a Sempra spokesperson said.

The agreement was presaged by a letter of intent signed late last year in a ceremony involving the top government energy officials of the three countries near the end of a three day LNG Ministerial Summit in Washington DC (see Daily GPI, Dec. 19, 2003).

The receiving terminal being developed by affiliates of San Diego-based Sempra and Shell ultimately will have a capacity to process up to 1 Bcf/d, or about 7.5 tons/year of LNG. Sempra plans to market the gas in Mexico and the West Coast of the United States. The other half of the supplies that eventually land at the terminal will come from Shell’s own sources, a Sempra spokesperson said, adding that no processing will be needed to market the Indonesian gas in either Mexico or the United States.

Sempra said that construction contracts for the receiving terminal are expected to be signed by the end of this year. Operations are anticipated to start early in 2008, and both the construction and operations will meet “Mexican and international safety standards,” the company said. Those standards “meet or exceed most U.S. requirements.”

In their joint announcement, BP and Sempra called their agreement “highly flexible,” allowing for LNG shipments to be diverted to capture value in other markets while providing “substantial base volumes and revenues” to Sempra Energy LNG terminal.

“This is an important deal for a number of reasons,” said Vivienne Cox, CEO for BP’s gas, power and renewables division. “It secures a high-value market for Indonesia’s gas resources and connects gas users in Mexico and the United States to a significant new energy supply source.”

Cox noted that the deal completes the Tangguh LNG project’s portfolio of markets for its two-train launch, taking its overall sales beyond the 7.5 tons/year level, and allowing it to continue offering some of its supplies to what she called “other important markets in Asia-Pacific, such as Japan,” through the flexibility provisions.

Calling it a “landmark” for both the U.S. and Asia markets, Sempra President Donald Felsinger said the sales agreement “enables the further development of the first new LNG receipt terminal along North America’s West Coast, while allowing a new LNG supply Project (Tangguh) to move forward in Indonesia.”

The Tangguh LNG project is located in the Berau-Bintuni Bay region of Teluk Bintuni Regency, Papua, Indonesia, operated by BP Indonesia, which holds a 37.16% share in the project. BP’s partners include strong Japanese investments from companies held by Mitsubishi Corp., Japan National Oil Corp., and Sumitomo Corp.

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