(EnergyAsia, August 31, Monday) — In a major show of displeasure with Indonesia, Kansai Electric Power Co Inc, Japan’s second largest power producer, has cancelled its agreement to buy liquefied natural gas (LNG) from a plant in Central Sulawesi.

The deal could not be fulfilled because of the Indonesian government’s recent ban on the export of natural gas from the Matindok and Senoro fields in Central Sulawesi in a bid to encourage sales to domestic buyers.

The fields had been designated to supply gas to Indonesia-based PT Donggi-Senoro LNG, a joint venture between Japan’s Mitsubishi Corporation and Indonesian gas and oil firms PT Petramina and PT Medco Energi Internasional, at a price of US$6.16 per British thermal unit (BTU).

The Mitsubishi-led consortium was established to provide Kansai and Chubu Power Co Inc each with one million tonnes of LNG per year from the plant for 12 years starting from 2012.

The plant, estimated to cost US$2 billion, may not be economically viable if LNG is sold only to the domestic market. While Chubu has yet to show its hand, it is unlikely to proceed with the deal on its own.