Whilst addressing the 4th Indonesia-Japan Energy Dialog Forum, Indonesia Minister of Energy and Mineral Resources, Purnomo Yusgiantoro, reiterated the importance of cooperation between his country and Japan in the oil and gas sector - especially considering Indonesia is the world's largest producer of LNG and Japan its biggest customer.

Yusgiantoro believes that Japan stands to gain by having closer ties with Indonesia. According to the minister, Indonesia can provide "multi sources, better pricing and better proximity compared to Middle East sellers [and] we also offer flexibility in contracts."

Yusgiantoro also hailed the one-day forum as important to Indonesia. It was attended by 90 people, which also included a Japanese delegation made up for 39 business leaders and consultants.

However, whilst Indonesia is saying one thing, Japan is saying another.

According to its Director General of Natural Resources and Energy Policy at the Ministry of Economy, Trade and Industry, Hiroyuki Ishige, Indonesia remained one of his country's most important LNG suppliers.

He said while Japan was still interested in buying Indonesian LNG, it wants more competitive terms and conditions in future contracts.

With many LNG sales contracts expiring in 2010, Indonesia could stand to lose billions of dollars in revenue if those agreements are not signed. With stiff competition coming from other LNG producers like Australia, Malaysia, Qatar and Russia, Indonesia may have to acquiesce to Japan's demands.

It is believed that Japan is looking to secure more flexible, short-term contracts. It is also believed that it wants its LNG supply to come from various sources instead of the current single source.

The Indonesian government has already made initial proposals with Japan for the extension of its LNG contracts. It is hoping to export at least 12 million tonnes of LNG per year.