The Korean contract will generate five billion dollars in revenue throughout its 20-year period and will boost production from the field which has only secured contracts for 2.8 million tones of its proposed 7 million tones per annum capacity.

Tangguh LNG, due to start producing from 2007, beat competitors from a number of countries including Australia's North West Shelf venture which has already secured a multi-billion 25 year contract to supply the Guangdong province in China.

Following the shock failure of recent bidding to win the supply contract to Taiwan and the decision by a Japanese firm to cut LNG imports from Indonesia an internal market was looming as the saviour for Indonesia's once dominant industry.

The fear was that the failure to win Taiwan's tender could have put the Tangguh project in limbo especially considering the range of large LNG projects currently under development in the region.

Competing gas projects include the giant Russian Sakhalin project, Australia's NWS, the Bayu-Undan project off Darwin and the continuing development of Papua New Guinea's resources.

With this latest contract, Tangguh had now committed 4.1 million tons per annum of LNG to the Far East market and means the BP-led consortium operating the field can proceed with the $2.2 billion development of two LNG trains with the combined capacity of seven million tons per year at Tangguh.

Located in Berau Bintuni Bay, Papua, the Tangguh LNG project, the country's third LNG plant, is owned by a BP-led consortium and will source gas from 14.4tcf of proven reserves in offshore fields around the planned scheme.

A day before winning the South Korean contract Indonesia signed a memorandum of understanding with the Marathon Oil Corp. to market LNG to the US and Mexico. Under the MoU Indonesia will supply six to 10 million tones per year at international prices.