Mitsubishi Corporation (MC) is pleased to announce that the final investment decision (FID) on the Donggi-Senoro LNG (DSLNG) project in Indonesia has been reached. The project, for the construction and operation of a natural gas liquefaction facility (LNG plant), is being spearheaded by PT Donggi-Senoro LNG (PT DSLNG), a company 51% owned by MC. Total cost is estimated to be approximately 2,800million USD (230 billion JPY). Indonesia has the largest natural gas reserves in Southeast Asia and is the world's third largest LNG exporter. The DSLNG project will be Indonesia's fourth LNG project and the second involving MC, after the Tangguh project.
Beginning in 2014, PT DSLNG aims to produce and deliver approximately two million tonnes of LNG per year, along with associated condensate (approximately 47,000 B/D crude oil equivalent), and has also come to terms with JGC Corporation on the LNG plant's engineering, procurement and construction (EPC). Established in December, 2007, PT DSLNG is a joint venture between MC, Pertamina Energy Services Pte. Ltd. (PES)., and PT. Medco LNG Indonesia (MLI). PES is a subsidiary of Indonesia's state-owned oil and gas company, PT. Pertamina (Persero), and MLI is a wholly owned company of PT. Medco International Tbk, Indonesia's largest private oil and gas company. Furthermore, PT DSLNG has signed the "Heads of agreement (HoA)" for the LNG sales and purchase agreement (SPA) with Chubu Electric Power Co., Inc. and Kyushu Electric Power Co., Inc. respectively. Negotiations are being finalized with Korea Gas Corporation (Kogas).
MC will transfer its shares of PT DSLNG to a special purpose company (SPC). The SPC will take over some of MLI's shares as well, bringing its total stake in PT DSLNG to 59.9%. Kogas, the world's largest LNG buyer, will also be a partner in the SPC with a 25% share, making this project the first joint LNG project between Japan, Korea and Indonesia, and opening up a new era of cooperation in the energy sector for these three nations.
MC's involvement will be very different from its role in other LNG projects that were spearheaded by international oil majors, and in which MC was only a minority partner. Since its inception, MC has been coordinating the project's development, and this will be the first time a Japanese enterprise has taken the lead in planning and operations following an LNG plant's construction. Furthermore, the project's scale should pave the way to commercialization and practical use of remote, small- to medium-sized gas fields that have yet to be developed. Together with the Kangean project, in which MC is developing natural gas for domestic supply, the DSLNG project should help MC contribute even further to Indonesia's emerging economy.
MC also hopes to leverage this project into an increasingly stable supply of LNG to Japan and East Asia, and use it to enhance its expertise in the LNG business, which has grown steadily since the trading company's initial venture into the field in 1969, importing LNG from Alaska.