Tangguh Partners Sign Gas Sales Agreement with K Power of Korea

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31 August 2004
BP and its partners in the Tangguh liquefied natural gas (LNG) project in Indonesia today signed a sales and purchase agreement with K Power of South Korea for the supply of up to 800,000 tonnes of LNG a year for 20 years, starting in 2006. The signing in Jakarta was witnessed by representatives of BPMIGAS, the Indonesian oil and gas regulatory agency.

The LNG will be used to power K Power’s new 1074MW power station being built at Gwangyang in southwestern South Korea, due to commence operations in 2006. K Power, formerly known as SK Power, is a joint venture between SK Corporation (with 65 per cent) and BP (35 per cent).

Today’s signing follows an earlier agreement, signed in July, for the supply of 550,000 tonnes of LNG a year to POSCO, Korea’s largest steelmaker, and completes the process outlined in the heads of agreement signed between SK Corporation and the Tangguh partners in July 2003.

The LNG supplied under both agreements will be delivered to POSCO’s new Gwangyang LNG import and regasification terminal, which is currently under construction.

Anne Quinn, Group Vice President of BP’s Gas, Power & Renewables business, commented: “This agreement is another important step in the development of the Tangguh LNG project which is firmly on track to meet the gas requirements of Tangguh’s customers in Asia and North America. Together with our existing Chinese and South Korean sales agreements and the almost finalised deal for supply to Mexico and US markets, the Tangguh project is making excellent progress towards a final investment decision later this year.”

In addition to the K Power contract, the Tangguh Project has sales and purchase agreements in place for the supply of 0.5 million tonnes of LNG a year to Posco of S. Korea, and 2.6 million tonnes of LNG a year to China’s Fujian LNG import terminal. The project is also in the process of finalising a further agreement to supply up to 3.7 million tonnes of LNG a year to Sempra Energy’s proposed LNG import terminal at Costa Azul, Mexico.

Notes to Editors:

  • The Gwangyang power project will be the first privately owned power generation facility to be developed for Korea’s liberalised electricity generation industry.
  • The Tangguh LNG project is located in the Berau-Bintuni Bay region of Teluk Bintuni Regency, in the Indonesian province of Papua (formerly called Irian Jaya), Indonesia’s easternmost province. The project is operated by BP Indonesia, which holds a 37.16% stake in the project, as a PSC contractor to the regulator, BPMIGAS.
  • BP’s partners in the Tangguh Project are CNOOC Ltd - 16.96%; MI Berau B.V (held by Mitsubishi Corporation and INPEX Corporation) - 16.30%; Nippon Oil Exploration Berau - 12.23%; KG Companies (held by Japan National Oil Corporation, Kanematsu Corporation and Overseas Petroleum Corporation) - 10.0%; and LNG Japan Corporation (held by Sojitz Corporation and Sumitomo Corporation) - 7.35%
  • The Tangguh gas fields contain 14.4 tcf of certified proved natural gas reserves.
  • BPMIGAS and the Tangguh partners have selected a consortium of Kellogg, Brown and Root, JGC Corporation and PT Pertafenikki Engineering (KJP) as the preferred LNG plant engineering, procurement and construction (EPC) contractor. Tangguh’s launch plan comprises two "trains" (units that purify and liquefy gas) which will be capable of producing at least 7 million tonnes of LNG per year.
  • To date, Tangguh have ordered all long lead items, such as the two compressor trains for the project from GE Energy.
  • Approval for the project’s Environmental and Social Impact Assessment (“AMDAL”) was granted in 2002. Refurbishment of an airstrip and jetty at Babo, near the project site, has been completed. Relocation of villagers from their existing village on the site of the future LNG plant to the newly constructed village of Tanah Merah Baru has recently been completed.

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