Indonesian state electricity firm PT Perusahaan Listrik Negara (PLN) says it is one step closer to sealing a deal to buy about 1.5 million tons per annum (mtpa) of liquefied natural gas (LNG) from Iran over the course of 10 to 15 years.

PLN President Director Dahlan Iskan told reporters that representatives from the Iran LNG Company (ILC) had met with PLN Primary Energy Director Nur Pamudji on Tuesday to discuss details of the gas import plan.

“Although no commitment has been made, Iran is serious about the possibility of selling LNG to us,” Dahlan said at his office in Jakarta on Tuesday evening.

“[ILC] planned to come here because when we visited Iran [earlier this year], we showed serious intention in importing LNG.”

Pricing has not yet been discussed, Dahlan said, adding that he was optimistic that PLN could negotiate a very good price as ILC seemed to need a new market to sell its LNG.

The head of PLN’s oil and gas division, Suryadi Marjoeki, said that ILC representatives asked PLN to prepare necessary documents and to submit a price offer.

He added that PLN had expressed its intention to ILC to ask for special pricing.

“The gas sales contract will last for between 10 and 15 years. The LNG will be sent to the planned Belawan floating storage and re-gasification unit [FSRU] in North Sumatra,” he said.

The receiving terminal is a project of state gas distributor PT PGN. When construction is complete next year the terminal will have a total capacity of 1.5 mtpa.

However, PLN would need to renew its agreement with PGN to use the terminal since its existing contract had expired, Suryadi said.

The electricity firm has asked the Energy and Mineral Resources Ministry to help negotiate a new contract.

Dahlan previously said that PLN might delay its plans to import LNG from other countries, claiming that around 10 domestic gas producers had suddenly submitted offers to sell gas to PLN after he returned from Iran.

He added that the amount of gas offered by the 10 companies would nearly cover PLN’s gas shortage of around 1,000 million standard cubic feet per day (mmscfd), declining to elaborate further.

The company has currently acquired about 800 mmscfd of gas from the government — well short of the 1,800 mmscfd of gas that PLN said it needed to fire its power plants throughout the nation, as previously reported.

Major power plants such as Tanjung Priok and Muara Karang in North Jakarta; Muara Tawar in Bekasi, West Java; and Tambak Lorok in Central Java have faced difficulties in acquiring a supply of gas since starting operations.

Regarding the government’s proposed plan to cut electricity subsidies from Rp 66 trillion (US$7.74 million) this year to Rp 45 trillion next year, Dahlan said that PLN had no problem with the initiative.

Dahlan said that the amount of the government’s proposed subsidy would be sufficient if oil and coal prices in 2012 were stable.

However, he warned the government that for every US$1 increase in oil prices, based on government assumptions, the government would have to add about Rp 1 trillion ($117 million) to the electricity subsidy.

Previously on June 18, M. Suryadi Mardjoeki, a senior official of PLN announced that Iran's LNG Corp. (ILC) has pledged to supply liquefied natural gas (LNG) to state electricity company PT Perusahaan Listrik Negara (PLN) for 15 years starting in 2013.

The gas will be used by a number of steam-powered electricity plants such as PLTGU Muaratawar, PLTGU Muara Karang and PLTGU Tanjung Priok, NG World News reported.

Imports will start in 2013 after the completion of the construction of a floating storage re-gasification unit in the Jakarta Bay, Suryadi said. 

The construction of the facility, from which the gas is to be distributed to the power plants, is expected to be completed only in 2012.

According to the Indonesian Chamber of Commerce and Industry, the value of Indonesia’s oil and gas imports from Iran reached US$385 million in 2010, a sharp increase compared to the US$177 million the previous year.