OREANDA-NEWS. December 12, 2014. China National Offshore Oil Corp. (CNOOC) is unhappy because it will not receive any state aid to help it offset the rising cost of LNG imports from BP’s Tangguh plant – China’s sole Indonesian source of the fuel.

State-owned CNOOC’s bill for Tangguh imports has surged since the company agreed a new price formula with Jakarta that took effect on 1 July (see CNOOC agrees to double Tangguh LNG price, 1 July 2014).

CNOOC imported 2.11 mt of LNG from Tangguh during the first 10 months of 2014, according to Chinese customs data. Imports cost an average of USD4/MMBtu from January to July, but more than doubled to USD 9.37/MMBtu in August, USD 9.1/MMBtu in September and USD10.06/MMBtu in October.

“We have made a loss… since the cost increased in July,” said a source at CNOOC’s Putian terminal in Fujian province, which receives Tangguh’s LNG.

To alleviate the losses, the Fujian pricing bureau announced the average citygate gas price would rise by 69.2% on 16 November, from RMB 1.82 per cubic metre (USD 8.50/MMBtu) to RMB 3.08/cm, and that the increase could be passed on to end-users.

But the bureau said CNOOC would have to bear the higher post-July cost of Tangguh LNG by itself – indicating the company will receive no help for losses it has suffered so far.

“To be honest, we are not satisfied with the bureau’s decision,” said the source.

The Indonesian government and CNOOC agreed the new formula after tough negotiations that lasted more than a year, according to the source.

The previous formula was 5.25% of the Japanese Crude Cocktail (JCC), with a ceiling of \\$38 per barrel on the JCC price and a constant of USD 1.35/MMBtu .

CNOOC agreed to scrap the USD 38/bbl cap, allowing the LNG price to fluctuate with crude costs, and also agreed to raise the formula’s linkage to the JCC.