ARCO says RI to remain leading LNG supplier

ARCO says RI to remain leading LNG supplier

SINGAPORE (Dow Jones): Indonesia will remain well placed as the leading liquefied natural gas supplier in Asia-Pacific when the region emerges from the economic crisis, Herb Vogel, a senior official with ARCO Indonesia Inc., told Dow Jones Newswires.

Indonesia's role as a significant LNG producer and supplier is underpinned by its proximity to major demand centers, huge supply potential and its unique identity as the region's only country with multiple supply centers, the official said.

Japan and S. Korea, which together account for close to 60 percent of global LNG consumption, are 2,400 nautical miles away from Indonesia, Vogel said. In the thick of the crisis in 1998 when Asia was bruised by a depressed market, Indonesia supplied 42 percent of Asia-Pacific's LNG requirements, he added.

Indonesia has two LNG plants - located in Arun and Bontang - with a combined capacity of 29.5 million metric tons a year. Algeria is the only other nation in the world which boasts multiple plants, with its total LNG capacity of 22.5 million tons a year coming from four different sources.

Indonesia makes up more than 50 percent of the Asia Pacific's LNG capacity. Other producing nations in the region are Malaysia, Australia and Brunei.

Indonesia's supply diversity, and security as a result, has been a salient feature of the country's success in the LNG market, Vogel said.

He said Indonesia is well placed to grab any opportunities when demand emerges for additional LNG supplies or when the majority of existing contracts expire in late 2004 and early 2005.

To plug into that opportunity, ARCO Indonesia, a subsidiary of Atlantic Richfield Co., or ARCO, has been pressing ahead with its plans to build a $4 billion LNG plant in Tangguh, with completion scheduled by late 2004, Vogel, vice president of the project, said.

Construction of the plant, which is expected to take three and a half years to complete, will start "late 2000 or early 2001," the official said. He added that Pertamina, Indonesia's state oil company, will put in place necessary arrangements to sell the output.

The fact that Japanese companies together have a 20 percent interest in the project improves the prospects of selling a significant portion of Tangguh LNG to Japan, the largest LNG consumer in the world, Leon Codron, president of ARCO Indonesia said.

The plant will be fed from a number of gas fields located within the Beraua, Muturi and Wiriagar blocks. The fields have proven and probable reserves of 18.3 trillion cubic feet TCF).

The 6 million tons per annum plant requires only 8 TCF for a 20-year supply which means there is room for further expansion of the plant when the need arises, Vogel said. ARCO has plans to add four more trains in future, he added.

In addition, "one of the reservoirs in the fields has prolific deliverability which is what is required for an LNG plant," he said. The fields extend from onshore to shallow water up to water depths of 80 meters, he added.

"We see a lot of exploration potential in the vicinity of the plant," and ARCO will soon begin drilling to explore those areas, Vogel said.

ARCO is the largest Indonesian gas producer, with output of nearly 700 million cubic feet a day feeding the Java gas market, he said. All the gas comes from multiple fields in two production sharing contracts, he added.

ARCO owns nearly 36 percent of Indonesia's 16.7 million tons a year Bontang LNG plant, the largest single plant in the world.