CNOOC to Pay More for Indonesian LNG

China National Offshore Oil Company (CNOOC) will now pay a higher price for the gas being produced from BP's Tannguh project in Indonesia, Reuters reports.

The Chinese major ships about 2.6 million tonnes of liquefied natural gas (LNG) annually from Indonesia's West Papua province to China.

Under this agreement, which was signed in 2002, the gas price was linked to oil prices and capped at $25 per barrel, and came to $2.40 per million British thermal units (mmbtu), Reuters said. This was increased in 2006 but remained capped at an oil price of $38 per barrel and came to around $3.35 per mmbtu, the news agency added.

"The president of CNOOC told the Energy and Mineral Resources Minister directly that they were ready to increase the price," upstream oil and gas regulator SKKMigas chief Rudi Rubiandini said in a press release, Reuters said.

During the meeting the energy minister told CNOOC that its gas contract was no longer at an acceptable market price, energy ministry spokesman Susyanto said in a separate statement.

In contrast to CNOOC, Indonesia sells gas to Japan and South Korea for more than $16 per mmbtu and to domestic buyers for $10 per mmbtu.

"If it's above $7 or $8 that would be pretty good compared to now," SKKMigas spokesman Elan Biantoro told Reuters adding that the government was targeting a revised gas sale price above $10 per mmbtu.