ADB loans $400m to Indonesia to expand LNG facility

The project will add a third LNG train.

The Asian Development Bank (ADB) has signed a $400m loan to help expand the Tangguh liquefied natural gas (LNG) production facility, one of the largest in Indonesia.

"Expanding the Tangguh LNG facility is crucial for Indonesia to meet its increasing energy demand,” said Christopher Thieme, Deputy Director General for ADB private sector operations. “The project will also support the country’s goal of developing a more sustainable energy mix in a continuous effort to achieve energy security while reducing carbon emissions.”

Operational since 2009, ADB said that the Tangguh facility in eastern Indonesia’s Papua Barat province supplies around 7.6mmetric tons per annum (mtpa) of LNG, one of the largest productions in the country. The Tangguh expansion will be financed through a trustee borrower scheme, an arrangement typically used to finance natural gas infrastructure in Indonesia. BP operates the facility through BP Berau Ltd., a subsidiary.

ADB added that the Tangguh expansion project will add a third LNG train — equipment that liquefies gas — that will increase capacity by an additional 3.8 mtpa, along with associated onshore and offshore production facilities and supporting infrastructure. Train 3 is expected to start production in 2020. The two existing trains were financed by ADB, the Japan Bank for International Cooperation, and international commercial banks in 2006-2007. The ADB loan closed in 2014.

The expansion project will increase government revenues while helping Indonesia meet its growing energy demand and energy security goals. Tangguh helps in the development of a lower carbon energy mix for the country by selling 75% of the new LNG production to the national power utility to fuel existing and planned gas fired power plants. The project will help accelerate economic development in Papua Barat province by employing local Papuans at the LNG production site, both during and post-construction phase, and promoting livelihood programs to accelerate local economic growth.