Tangguh LNG Project, Bintuni Bay, West Papua, Indonesia

The Tangguh gas fields, situated near the Bintuni Bay region of West Papua province, were discovered by ARCO Exploration in the mid-1990s. Called 'Tangguh' after the Indonesian word for 'resilient', the reserves are estimated to be over 18.3 trillion square feet. These fields have the potential to become one of the world's premier natural gas supplies.

The Tangguh LNG project was initiated by ARCO and Pertamina in 1997 to exploit these gas fields. The six fields include the two super-giant gas fields of Wiriagar Deep and Vorwata as well as the smaller adjacent fields of Roabiba, Ofaweri, Wos and Ubadari. The project began production in 2009.

Tanguhh LNG project overview

The Tangguh LNG project involves tapping the Tangguh fields, processing the gas into LNG and loading it for shipment. The project includes two unmanned offshore production platforms that pump gas from the reservoir and then relay it through subsea pipelines to an LNG processing facility in Bintuni Bay, location of the village of Tanah Merah.

The LNG gas liquefaction plant consists of two liquefaction trains with a combined capacity of seven million tonnes per year of LNG. The first train began production in mid-June, while the second train came onstream in the third quarter of 2009. There are also associated jetties and marine facilities of a tanker terminal to export the gas via tanker to markets in East Asia and North America.

"The Tangguh LNG project was initiated by ARCO and Pertamina in 1997."

The land acquired for the LNG processing facility measures 3,200ha, much of which remains an environmental green zone as the initial facility only required 800ha. An investment of $3bn has been made into the project so far.

On consultation with the local community construction of the processing plant has resulted in the relocation of the people of Tanah Merah, a village that has been inhabited by 127 families, and Onar.

The land was acquired in 1999 and involved a negotiation of resettlement agreements, specific agreements detailing BP and community agreements (including village and house design) were developed in 2002 and 2003 (the village move was completed in 2004.

The contractors responsible for construction of new village facilities for Tanah Merah are Panata Thiess Joint Operation and for Onar PT Firma Irian Djaya.

Personnel at Tangguh LNG project

At full capacity the project requires approximately 500 personnel for on-shore and offshore activities, many of whom underwent training. Papuan engineers were recruited since 2000 and trained at various petroleum facilities to prepare them for their roles on the Tangguh Project.

The initial pool intake consisted of 29 individuals. In different batches they have gained experience in BP's Java operations, and underwent training at the Oil and Gas centre at CEPU and in other areas.

Production sharing contracts

BP is the operator of the Tangguh Project as a PSC contractor to the Indonesian oil and gas regulatory body BPMIGAS (Pertamina was also involved). In April 2003, the authority to operate the LNG plant was handed over from Pertamina to BP in line with Pertamina's change from regulator to a stand-alone company.

"BP is the operator of the Tangguh Project as a PSC contractor to BPMIGAS."

The gas fields are covered by three separate PSCs. The Muturi, Berau and Wiriagar fields are each shared by different partner shareholders in the Tangguh Project as of May 2004: BP with 37.16%, MI Berau (held by Mitsubishi Corp and INPEX Corp) with 16.30%, CNOOC with 16.96%, Nippon Oil Exploration Berau with 12.23%, KG Companies (held by Japan National Oil Corp, Kanematsu Corp and Overseas Petroleum Corp) with 10%; and LNG Japan Corp (held by Nissho Iwai Corp and Sumitomo Corp) with 7.35%. Production began in 2009.

Project progress and contractors

In October 2002 the Indonesian Government approved the Tangguh project's AMDAL (Environmental and Social Impact Assessment). In April 2003, a contractor consortium of Kellogg, Brown and Root, JGC Corporation and PT Pertafenikki Engineering (KJP) was selected for the engineering, procurement and construction (EPC) contract for the Tangguh liquefied natural gas (LNG) facilities.

Babo was selected as the base camp area for the project and accordingly the airstrip and landing jetty were refurbished (this work being completed by May 2003). In September 2003 the compressors, a long lead item for the liquefaction plant, were ordered from GE Oil and Gas (contract worth $90m).

The processing facility consists of two LNG processing trains, a farm of storage tanks and an LNG tanker loading terminal, as well as an aircraft landing strip, maintenance facilities, offices and a personnel accommodation complex. In future phases of construction the LNG liquefaction plant, depending on requirements, could be expanded to five or eight trains.

LNG customers

The Tangguh Project signed up its first customer in September 2002 - CNOOC's second LNG terminal at Fujian, China, will be supplied with 2.6 million tonnes per year for 25 years. CNOOC acquired a 12.5% stake in the Tangguh Project in February 2003 from BP, which was evidence of their interest and confidence in the project and for the growing demand for LNG in China.

K Power (800,000t per year) and steel company Posco (550,000t per year) in Korea selected the Tangguh Co-ventures as their preferred supplier for up to 1.35 million tonnes per year of LNG in August 2003, in a 20-year deal worth an estimated $2bn. Korea is the world's fastest growing LNG market.

"K Power uses the LNG to supply its power plant, located in Gwang Yang, South Korea."

K Power uses the LNG to supply its power plant, located in Gwang Yang, South Korea, which began operations in September 2006. However, BP had to route supplies from another Indonesian operation to meet K Power's demands after announcing it was pushing back the opening of Tangguh by a year until 2008 which was later postponed to 2009.

In addition, Sempra Energy LNG Corporation signed a deal for a 20-year supply of LNG in early 2004 for markets in the US and Mexico.

Under the agreement, deliveries from the Tangguh fields by LNG tanker began in late 2009 to Sempra's proposed LNG import (receipt) and re-gasification terminal 14 miles from Ensenada in Baja, California, Mexico.

To meet the supply contracts that became effective from 2009, BP is required to acquire gas from the market or from Bontang. The Bontang LNG plant is located at East Kalimantan in Borneo. Its main shareholder is Pertamina (which has links with the Tangguh Project), with private partners including Total, Fina and Elf.

BP said that its decision to delay commercial production from Tangguh is due to logistical and financial concerns.