China signs Indonesian gas deal

China needs additional energy resources

A 25-year agreement was signed on Thursday for the supply of Indonesian liquefied natural gas (LNG) to China's Fujian province.

The deal between a BP-Pertamina consortium and China's CNOOC oil firm is a boost to Indonesia's efforts to shore up its ailing economy.

The agreement covers the supply of 2.6 million tonnes of LNG per year to Fujian from the Tangguh field in Papua province.

The BBC's Richard Galpin in Jakarta said the gas was likely to come on stream from 2007.

He told the BBC's World Business Report that the deal was regarded as a major breakthrough.

"This particular gas field down in the province of Papua is believed to be huge."

Dangerous environment

Indonesia is already the world's largest supplier of LNG and according to estimates there is more than 14 trillion cubic feet of certified reserves in this field.

As Asia's only Opec member, Indonesia currently supplies 22 million tonnes of LNG annually to Japan, South Korea and Taiwan.

Energy companies often have a difficult time in the vast archipelago because of a lack of consistent regulations and security problems.

This deal is seen as a vote of confidence in an area considered controversial after the killing of Westerners at a gold and copper mine on the island.

The project will generate jobs and reflects international confidence in Indonesia's stability.

The contract is expected to shore up Indonesia's foreign exchange reserves and boost Indonesia's efforts to attract foreign investors.