Indonesia, China reach deal on price hike of gas from Tangguh

(Xinhua) Updated: 2014-07-01 11:04

JAKARTA - The Indonesian renegotiation team has made agreement with buyer in Fujian, China over the rise of liquefied natural gas (LNG) price from Tangguh field in Papua of Indonesia, an Indonesian official disclosed here Monday.

Indonesian Energy and Mines Minister Jero Wacik revealed that both sides agreed to raise gas price from $3.3 per mmbtu (million metric British thermal unit) to $8 per mmbtu and it would keep rising based on the Japan Crude Cocktail ( JCC) or the average price for customs-cleared crude oil imports, which is used in the formula for determining gas price.

In the renegotiation, both agreed to delete the cap of JCC price which was determined only at $38 per barrel, said Wacik.

The formula for the LNG price before the renegotiation was 5.25 percent multiplied by JCC price, so the gas price at that time was at $3.3 per mmbtu, said Wacik.

"Starting from July 1, we have agreed the price is (determined with the formula of), 0.065 multiplied by JCC, and then plus $1.5 per mmbtu,"he told a press conference at the State Palace after the cabinet meeting.

"With the JCC price of $100 per mmbtu in May, the gas price becomes $8?per mmbtu. This is an extraordinary increase, it is four times higher," Wacik added.

As the JCC price would keep rising, the minister expected the gas price to be at $10.3 per mmbtu next year and $12?per mmbtu in 2017, he said.

The contract of the gas sales to Fujian, China will end in 2034.

The sales of gas was signed under the presidency of Megawati Soekarnoputri in 2002.