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Norwegian company Hoegh LNG has tapped a group of Asian banks for US$310mn to complete the Lampung floating liquefied natural gas (LNG) project in Indonesia.

Five banks participated in the lending, namely DBS Bank, the Korea Development Bank, Overseas Chinese Banking Corporation (OCBC), Standard Chartered and the Bank of Tokyo Mitsubishi UFJ.

The South Korean export credit agency (ECA) K-Sure has provided a guarantee for 75% of the overall financing package, which has a tenor of eight years.

The loan will fund the Lampung floating storage and regasification vessel (FSRU) and mooring project, which will provide LNG to the capital city of Jakarta, sourced from elsewhere in Indonesia.

GTR understands that Hoegh has a 20-year offtake agreement with Perusahaan Gas Negara (PGN), the Indonesian state-owned, publically-listed natural gas transportation and distribution company. PGN also has an extension option of five plus five years.

Specifically, the finance will be used to fund the construction of an FSRU tanker, being built in a Korean shipyard (hence the K-Sure guarantee) and the construction of an import terminal, including a tower yoke mooring system. This will connect the tanker to an Indonesian pipeline, being constructed by a local engineering firm.

Upon its completion in July 2014, PGN will purchase the pipeline and mooring system. Should PGN not take up the extension option, Hoegh LNG will reclaim the tanker in 2034.

While the pricing of the transaction hasn’t been disclosed, Hoegh’s vice-president of strategy Arild Jæger tells GTR that he expects it to be more expensive than a similar project the company completed in Lithuania last year.

He explains: “One of our other new vessels went to Lithuania on a 10-year contract. We also had the ECAs of Korea supporting that and had interest from the Nordic banks. For Indonesia, the Nordic banks weren’t so keen so we’ve been working with Asian banks.”

“We saw that the margin is slightly lower than the Lithuanian vessel. But on the other hand, the swap rate has gone up because of general interest rate movement over the past seven months. All-in-all, the financing will be more expensive than the previous one, which we estimate was done at an overall cost of 5.1%. This one will be more expensive mainly because of the swap rate going up by between 1 and 1.5%. This is not very good.”

Indonesia has historically been among the world’s top 10 exporters of natural gas (in 2007, it was estimated to have exported 32.6 billion cubic metres), shipping to Japan, Korea, the US and China. However, concerns over the country’s ability to satisfy its growing domestic energy requirements have led to a fall in exports.

Last year LNG exports fell by 13.8%, as cargo that would previously have been exported was rerouted for domestic consumption. Previously, Hoegh operated a terminal exporting LNG from Sumatra. Now, though, it has been contracted to facilitate the supply of LNG to the capital.