BP Signs $3.74bn Loan Agreement for Tangguh Expansion Project

Oil major BP and Indonesian regulator SKKMigas on Wednesday signed a loan agreement worth $3.74 billion with a consortium of international and local banks to fund the expansion of BP’s Tangguh LNG plant in West Papua.

This is the first time local Indonesian banks will be proving loans for oil and gas project, SKKMigas said.

Domestic institutions are Bank Mandiri (Persero) Tbk., Bank Negara Indonesia (Persero) Tbk., and Bank Rakyat Indonesia (Persero) Tbk. and infrastructure finance company Indonesia Infrastructure Finance.

Among the international lenders that provide loans under the same agreement are Mizuho Bank, Bank of China, China Construction Bank and BNP Paribas. 

Japan Bank for International Cooperation (JBIC) will also be extending a loan of $1.2 billion to finance the Tangguh LNG expansion project.

In July, BP and its partners approved the final investment decision (FDI) pertaining to expansion of Tangguh LNG project. The expansion project will add a third LNG process train (Train 3) and 3.8 million tonne per annum (mtpa) of production capacity to the existing facility, bringing total plant capacity to 11.4 mtpa. The project also includes two offshore platforms, 13 new production wells, an expanded LNG loading facility, and supporting infrastructure, BP said. Sources said that with falling costs in the industry the project was now put at the lower end of the $8bn-$10bn range.

BP said about 75 percent of the Train 3 annual LNG production has been sold to the Indonesian state electricity company PT. PLN (Persero). The remaining volumes are under contract to Kansai Electric Power Company in Japan, the other foundation buyer for Train 3.

Awards for the project’s key engineering, procurement and construction (EPC) contracts are expected in the third quarter of 2016 with construction to begin thereafter. Operation is expected in 2020.