Japan Bank for International Cooperation (JBIC) has signed a loan agreement totalling up to US$1.2bn with Japan International Finance Management (Tangguh) Corporation, a project company set up by Japanese sponsors, to finance the Tangguh LNG Project in Indonesia.

The project, which aims to develop natural gasfields in West Irian Jaya and process their output into LNG, is undertaken by Mitsubishi, Nippon Oil Exploration (Noex), LNG Japan (a subsidiary of Sumitomo Corporation and Sojitz), Inpex, Kanematsu, Overseas Petroleum (a subsidiary of Mitsui & Co), Japan Oil, Gas and Metals National (Jogmec), BP and China National Offshore Oil (CNOOC).

Under this project, which is the first large project being undertaken under the new oil and gas law in Indonesia, three blocks of gasfield in the Berau Bay are developed together and LNG is produced in gas liquefaction facilities (annual capacity: 3.8mn tons x 2 trains) and sold.

Japanese participants have a combined total of 45.9% share (based on aggregated output from three blocks of gasfield) in this Project.  JBIC supported this project to strengthen its ties with Indonesia, which is the largest LNG exporter for Japan, thereby serving to secure a stable supply of energy resources to Japan.

Currently, increasing the supply of natural gas for domestic use is high on the national agenda because Indonesia has to cut back on the fiscal burden of domestic oil subsidies, while setting aside adequate crude oil for exports.

Thus, the government would like to give priority to gas supply for domestic use.  Drawing upon its experience of consistently supporting Indonesian LNG projects since 1970s when the country was at the very first stage of LNG development, JBIC has encouraged the country to continue LNG exports to Japan through negotiations during the project examination process.