Arun gas field halts LNG loading for South Korea

Arun gas field halts LNG loading for South Korea

SEOUL (Agencies): A vessel scheduled to load 56,000 metric
tons of liquefied natural gas from Indonesia's Arun gas field
Wednesday for delivery to South Korea floats idle in Singapore
waters, an official from state-run Korea Gas Corp. said on
Wednesday.

"We are supposed to load today, but that's impossible...the
Arun facility is closed..." he said. "(The tanker) is waiting
around in Singapore."

The Kogas official said he was unsure exactly when it could
begin loading as production from the Arun gas field had stopped
due to security concerns. He said Indonesian officials had
contacted Kogas and the government to inform them of the supply
disruption.

A spokeswoman for ExxonMobil Oil Indonesia Inc., which is the
sole natural gas supplier to PT Arun Gas and liquefies the
natural gas before it is shipped to South Korea and Japan, said
on Tuesday that the company suspended natural gas pumping at its
three onshore blocks - Arun, Lhoksukon and Pase.

The three blocks produce a total of 1.6 billion cubic feet of
natural gas daily. ExxonMobil Oil Indonesia is a unit of Exxon
Mobil Corp.

The Indonesian government said Monday that it will meet LNG
deliveries to South Korean and Japanese buyers with LNG from
Bontang or will ask Malaysian and Australian producers to fill
the shortage.

Indonesia PT Arun NGL's liquefied natural gas production has
fallen by close to 90 percent from March 7 following a halt in
onshore Aceh gas production, a company official told Dow Jones
Newswires Tuesday.

The only source of gas supply is now derived from North
Sumatra offshore platform which produces around 350 million cubic
feet of gas daily, officials said.

PT Arun NGL's LNG inventory now stands at 399,900 cubic
meters, enough for one more export shipment, the company official
said, adding that part of the inventory is reserved for its fuel
plant.

This leaves Kogas scrambling for substitute cargoes, the
official said. Kogas had scheduled to load six LNG cargoes from
Arun in March, each with a volume of 56,000 tons, he added.

Meanwhile, an official of ExxonMobil said in Singapore on
Wednesday that Arun condensate output has also fallen to zero
following the company's move to halt its onshore Aceh gas
production this week, a company official told Dow Jones Newswires
Wednesday.

The onshore gas platforms were producing up to 30,000 barrels
of condensate daily before operations were suspended this week,
the official said.

Indonesian state-owned oil and gas company Pertamina and
ExxonMobil Oil Indonesia, a unit of Exxon Mobil Corp., are
responsible for marketing the Arun condensate.

ExxonMobil Indonesia ships around two 250,000-barrel cargoes
of the condensate every month to Singapore, sources said, adding
that spot availability for export was limited.

The first scheduled shipment for South Korea left Arun on
Monday after a one-day delay in loading. The cargo is to arrive
in Pyongtaek March 19, Kogas has said.

Kogas said Monday that in the event of a supply disruption
from Indonesia, it could easily adjust its delivery dates from
its other long-term suppliers - Malaysia, Brunei, Oman and Qatar.

Australian LNG

The Kogas official said it is also contacting Australian LNG
suppliers for possible substitute volumes for March. South Korea
doesn't have a term LNG contract with Australia, but has in the
past purchased on a spot basis, he added.

Indonesian officials have informed Kogas that the situation in
Arun may be cleared in a few weeks, but the Kogas official said
the South Korean government is concerned that the supply
disruption could drag into April and May. He said Kogas is asking
other LNG suppliers to ready substitute volumes for April and May
as well.

Kogas has said it is scheduled to receive five loadings from
Arun in April and four loadings in May, each with a volume of
56,000 tons.

"We are heading into summer season, so demand isn't so high,"
he said. "We are still very concerned about supply...but there is
less pressure."

Indonesia is still South Korea's largest LNG supplier. South
Korea is expected to import a total of 16.32 million tons of LNG
in 2001, of which 5.3 million tons will come from Indonesia, or
32.5 percent.

In 1998, South Korea purchased 66.5 percent of its total LNG
imports from Indonesia. The rest was imported from Malaysia and
Brunei.

In a related development, Tohoku Electric Power Co. said in
Tokyo on Wednesday it was seeking alternative sources of LNG.

A spokesman for the company said Tohoku was told recently by
Indonesia's state oil and gas company, Pertamina, that it was
unclear when operations would resume in Aceh's gas fields.

Tohoku Electric said it has an annual contract to purchase
four million tonnes of LNG, of which about three million tonnes
comes from Indonesia.

In addition to Indonesia, it imports LNG from Malaysia and
Qatar.

Japan's only other importer of Indonesian LNG, Tokyo Electric
Power Co. Inc. (TEPCO), reiterated that it was not immediately
affected by events in the troubled province.

TEPCO, Japan's largest power company, imports 510,000 tons of
LNG from Arun, accounting for only 3 percent of its total LNG
imports.

"If the Arun problem continues for a long time, say until July
when electricity demand rises, we will start considering other
steps," a TEPCO spokesman said.

"But we don't think it is a crisis yet."

TEPCO has long-term contracts to buy LNG from six other
suppliers, including Australia, Qatar and Malaysia.

Separately, Australia's North West Shelf liquefied natural gas
project in Western Australian said it is gearing up to sell
cargoes to customers left dry by the shut down of ExxonMobile
Corp.'s Arun gas fields in Indonesia.

"The Australian and Indonesian LNG industries have common
customers and we are working with those customers on options to
maintain their supplies," a spokesman for Woodside Petroleum
Ltd., operator of the North West Shelf, said.