SKK Migas Aims to Secure Buyer Commitment for Tangguh Gas Next Month

KATADATA - The government continues to look for domestic gas off-takers for the soon to be developed Train 3 Tangguh project. This is very important in order for the management to finally have the Final Investment Decision (FID), which is crucial to start the development project. 

Head of Public Relations of the government’s Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), Elan Biantoro, is hoping that the commitment can be secured in March. The timing is also important so that the development can progress and finish as scheduled. 

The government will get a 40 percent share of Tangguh refinery’s production, which will be allocated for domestic needs. The remaining production can be exported. But the problem here is there has been no firm commitment from any potential buyers. The most potential off-taker is Perusahaan Listrik Negara (PLN), but the state-owned firm is still unable to confirm the amount of gas it will buy.

There are also several other candidates that SKK Migas is currently negotiating with. But the government agency is still reluctant to mention names. One thing that is clear is that the negotiations are not going very well, especially where prices are concerned. 

Contractors and off-takers are all having a hard time reaching common ground on gas prices because of the effect of the plunge in the global oil prices. This has affected the gas price formula, and if the current price is used, contractors will almost certainly suffer losses. Even if they do turn a profit, the investment return rate will be very slow. 

Although the Train 3 Tangguh refinery is scheduled to be fully operational in 2020, finding off-takers is so important that the search has already begun. (Read more: Train 3 Tangguh Project is hampered by Long-Term Contract Problem & Refinery Regulation, Investors: There’s no Business Certainty)