Indonesia, China Agree on Higher Tangguh LNG Price

Indonesia has raised the ceiling price of Tangguh gas sold to China after seven years of negotiations.

Under the revised contract, Chinese state-owned oil and gas firm China National Offshore Oil Corp. (CNOOC) has to pay a ceiling price of $8 for every million British thermal units (mmbtu) of liquefied natural gas (LNG) from the Tangguh plant in Papua starting from Tuesday, reports Jakarta Post newspaper. 

The new price is more than doubled the previous contracted price of $3.3 per mmbtu which has been in place since 2006.

Indonesian government and the Chinese agreed to change the calculation of the Tangguh gas price by eliminating a cap on the benchmark Japan Crude Cocktail (JCC), Energy and Mineral Resources Minister Jero Wacik said on Monday, reports Jakarta Post.

“Fujian agreed to remove the cap last week,” he told reporters after a meeting at the State Palace.

He was referring to China’s province of Fujian, for which CNOOC buys 2.6 million tons of Tangguh’s natural gas per year. The Tangguh LNG plant is 37.16 percent owned by BP, which operates the plant, and 13.9 percent owned by CNOOC.

Jero said that with the current calculation, which eliminated the cap, the Tangguh gas price would continue to rise along with the increase in oil prices.

The original Fujian gas sale agreement was inked during the term of then president Megawati Soekarnoputri in 2002, when the JCC was capped at $26 per barrel. The calculation resulted in the Tangguh gas selling price being pegged at $2.4 per mmbtu.