BP receives approval for $8-bn Indonesian LNG plant expansion

BP has received investment approval for a $8 billion expansion of the Tangguh liquefied natural gas (LNG) project in Indonesia on Friday. The approval clears the decks for a third train to start operations in 2020.

British oil giant BP will go ahead with the expansion of Tangguh despite stated plans to cut this year due to weak oil prices. The company has also approved investment on an Egyptian gas field last week.

The investment will boost LNG production capacity at the Tangguh project in Indonesia's West Papua province by 50 per cent to 11.4 million metric tons.

The Indonesian power utility Peusahaan Listrik Negara, will get three-quarters of the gas from Train 3 according to BP. Japan's Kansai Electric Power would get the rest.

According to officials at Indonesia's upstream energy regulator SKKMigas, the project was worth $8 billion. However BP has declined to confirm the figure.

"We are finalising details with potential lenders and at this point I'm not able to disclose who they are," Christina Verchere, BP regional president Asia Pacific, told reporters.

In May BP cut the budget for the project to $8-10 billion from $12 billion.

"This final investment decision was made after confirmation with Tangguh production-sharing contractors and is based on commercial considerations," said Indonesian energy minister Sudirman Said, Reuters reported.

According to Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) chief Amin Sunaryadi in the plan of development (POD) of the expansion of the  Tangguh LNG project, the investment of Train 3 initially amounted to $12 billion, but because of some adjustments on EPC services, the investment in this project amounted to only $8 billion.
 
"The estimated investment of this project now amounts to only $8 billion because of the plunge in global oil prices, which have impacted the costs of EPC services," Amin said, The Jakarta Post reported.

Said said the Train 3 project was important because Indonesia required a considerable amount of energy. He added, the project was also deemed crucial because of its location in Papua, which became the focus of attention of the government for realising its strategic projects, including for supporting its plan to generate 35,000 additional megawatts of electricity, he added.