Antam to use compressed gas instead of oil for smelters

Antam to use compressed gas instead of oil for smelters

Leony Aurora, The Jakarta Post, Jakarta

State nickel and gold miner PT Antam plans to convert to using
compressed natural gas (CNG) from oil-based fuels in its
smelters, as part of a plan to cut fuel costs by half, a top
official says.

Burning oil to generate power cost about 9 U.S. cents a
kilowatt hour, while CNG would cost about 5.5 cents with current
global oil prices, Antam president director Dedi Aditya
Sumanagara said on Thursday.

The company was currently conducting feasibility studies on
the plan, which would be realized within one to two years, Dedi
said. "We're considering the best means to transport the CNG."

All of the company's smelters -- FeNi I, FeNi II, and FeNi
III; the latter which is yet to start operations, -- would
eventually use gas, he said.

Antam is already in talks with PT Medco Energi Internasional
to buy CNG amounting to 20 million British thermal units (mmBtu)
a day from the Senoro field in Central Sulawesi.

At present, oil-based fuels contributed between 35 percent and
40 percent of the firm's cost structure, Dedi said. "We'll be
able to cut it by half (using CNG)."

Mining companies have had to shoulder higher production costs
since July, when state oil and gas firm PT Pertamina applied
market prices to fuel bought by the sector. The new policy is
aimed at suppressing the ballooning cost of the fuel subsidies.

However, as global prices on ferronickel -- Antam's main
commodity -- remained high at about $6.5 a pound, the company was
likely to maintain the same level of profit as last year despite
higher costs, Dedi said.

"We may even see a slight increase (in net income)," he said.

Stronger prices in the global market sent Antam's net profit
last year soaring to Rp 826 billion (US$82.6 million), more than
triple the net income booked a year earlier.

The average price of ferronickel rose 48 percent last year to
$6.18 a pound, spurred by strong global demand amid disruptions
in the operations of giant nickel producers.

Antam's performance this financial year was hindered by the
FeNi II plant, which had to be shut down for six months because
of furnace problems after already being closed five for
maintenance.

Repairs to the smelter ended two weeks ago and it would start
production in less than a month. "It'll be back in full swing in
late October," Dedi said.

The company expects to see the capacity of its ferronickel
production double to 22,000 tons a year, with the new FeNi III
plant scheduled to go on line early 2006.

The government owns a 65 percent stake in Antam, while the
public controls the rest.