OREANDA-NEWS. November 15, 2012. Indonesia’s Ministry of Energy and Mineral Resources and oil and gas executive agency BPMIGAS have approved in principle the Plan of Further Development (POFD) for the expansion of the BP-operated Tangguh liquefied natural gas (LNG) project in Papua Barat province in eastern Indonesia.

The approval was announced today by UK Prime Minister David Cameron in London after a bilateral meeting with Indonesia’s President Susilo Bambang Yudhoyono, attended by BP Group Chief Executive, Bob Dudley, and BP Regional President Asia Pacific, William Lin.

In early September, on behalf of the Tangguh project partners, BP submitted the plan for the development of a third LNG liquefaction train (Train 3) for Tangguh. Approval of the plan is an important step in preparation for the final investment decision for this expansion, which is currently expected to be taken in 2014. This would potentially enable commissioning operations for the new train to begin in late 2018.

The total investment in Train 3 by Tangguh project partners is currently estimated to be up to USD 12 billion (?7.5 billion).

David Cameron said: "This agreement on a ?7.5bn development is great news for BP, one of the largest foreign investors in Indonesia. It's a huge boost to the UK's growing trade and investment in Indonesia's emerging market."

The expansion of Tangguh will be a significant step towards realising the full potential of this major strategic asset. Today’s approval of the plan is important progress, and a demonstration of our long term commitment to Indonesia and good cooperation with its Government. I would particularly like to thank the Energy Ministry and BPMIGAS for all their efforts in delivering this approval,” said Bob Dudley.

BP and partners in the Tangguh project will now begin tendering for the front-end engineering and design (FEED) services for the proposed Train 3 development.

The planned expansion will build on the established operation of the two existing liquefaction trains at the Tangguh LNG site, which is located in Teluk Bintuni Regency in Papua Barat. Train 3 is expected to add 3.8 million tonnes per annum (mtpa) liquefaction capacity to Tangguh, bringing total project capacity to 11.4 mtpa.

“The Tangguh project will contribute to meeting the growing energy demand in Indonesia and also the wider Asia Pacific region, to the benefit of Indonesia, local communities in Papua Barat, and BP and its partners,” said William Lin.

As part of the POFD, BP and its partners have also commited to a comprehensive package to help address Indonesia’s LNG requirements as well as local energy needs in Teluk Bintuni Regency.

Under the terms of the plan, BP and its partners have agreed to sell and supply 40 per cent of the LNG output from Train 3 to Indonesia’s state electricity company PT.PLN (Persero) for the Indonesian domestic market.

In addition, as part of the plan up to 15 million standard cubic feet a day of piped gas, supplied from the Tangguh fields and sufficient to generate up to 50MW of local power, would be allocated for sale from the date of the Train 3 start-up. This would supply and enable local infrastructure and commercial business as well as stimulate light industrial development, particularly in the North Shore villages of Teluk Bintuni Regency and beyond.

Finally, recognising the immediate needs that exist in the local area, the plan includes agreement for up to 8MW of power generated at the Tangguh plant to be sold to PLN to sell and distribute to residential communities in the Teluk Bintuni Regency. The electricity is expected to be provided in stages, with the first 4MW available in January 2013 and up to a further 4MW may be provided to PLN in following years to provide electricity to further residential communities.

Tangguh is operated by BP Indonesia as contractor to Indonesia’s oil and gas regulatory body BPMIGAS. BP holds a 37.16% interest in the project. Other Tangguh contract partners are MI Berau B.V. (16.30%), CNOOC Ltd. (13.90%), Nippon Oil Exploration (Berau), Ltd. (12.23%), KG Berau/KG Wiriagar (10.00%), LNG Japan Corporation (7.35%), and Talisman (3.06%)

BP has 45 years experience in Indonesia and is one of the largest foreign investors in the country. Activities are dominated by its exploration and production business, particularly Tangguh LNG which began operations in mid-2009.

Further regulatory and partner approvals will be required before the final investment decision for Tangguh expansion is taken.