OREANDA-NEWS. September 22, 2011. After successfully renegotiating the gas price with Malaysia’s Petronas two months ago, the government is now stepping up its efforts to talk with another buyer - China’s largest producer of offshore crude oil and natural gas.

Indonesia is seeking to raise the price paid by China National Offshore Oil Corporation for gas from a plant in Tangguh, West Papua, by 400 percent, said Hatta Rajasa, the coordinating minister for economic affairs.

“We have prepared a team for this,” Hatta said on Thursday, adding that the team included officials from the energy and finance ministries.

Hatta said the team would seek a new price formula to reflect the existing global price. The team was seeking payments “as high as the international price” for liquefied natural gas, Hatta said, without elaborating.

The government wants to raise the gas price to USD 12 per million British thermal units, from the current USD 2.40 per mmbtu. The first gas contract was signed in 2002 during Megawati Sukarnoputri’s presidency.

By comparison, the price of natural gas exported to Japan from plants at Arun in Aceh and Bontang in East Kalimantan is between USD 13 and USD 18 per mmbtu, Hatta said.

Hatta said the upstream oil and gas regulator, BP Migas, was ready to discuss the new rate with CNOOC. The contract is reevaluated every four years.

CNOOC account manager Ivis Tsang was not available for comment.

BP Migas head Raden Priyono said the government was also talking to state-owned company Perusahaan Gas Negara about raising the price it paid for LNG. “I have sent a letter to Minister of State Enterprises [Mustafa Abubakar], but he is in hospital now,” Priyono said.

BP Migas proposed PGN pay USD 5.50 per mmbtu, up from the current USD 1.80 per mmbtu.

The pair of negotiations have enormous financial implications for Indonesia. Earlier this month, Priyono forecast that the benefit to the government could amount to USD 6 billion a year.

Industry analyst Kurtubi, from the Center for Petroleum and Energy Economic Studies, had previously called for the government to prosecute those responsible for the low price in the initial contract.

In July, BP Migas and Petronas Carigali, a subsidiary of Malaysia’s state-owned energy giant Petronas, agreed to a new rate at close to \\$6 per mmbtu, more than double the previous price of \\$2.80 per mmbtu.

BP Migas has been working to renegotiate prices in a bid to boost revenue in line with the rising global price for natural gas.

LNG producers in Indonesia include ConocoPhillips, Total E&P Indonesie and state-run Pertamina.

The price paid for exported gas is usually higher than that charged to Indonesian utilities and companies.