Arun LNG plant hoped to operate at 50% this month

JAKARTA (JP): State oil and gas company Pertamina said on Friday the Arun liquefied natural gas (LNG) plant in Aceh would restart operations with two of its four LNG trains, or at 50 percent of its full capacity, later this month.

Pertamina president Baihaki Hakim said he hoped LNG exports from the Arun plant could be resumed again before the end of July.

He said that ExxonMobil was also expected to reopen at least two of its gas fields in Lhok Sukon in the northern part of the troubled province to feed the LNG plant.

"The volume is enough to allow the nearby Arun LNG plant to resume operating at half of its capacity," Baihaki told reporters after a meeting with ExxonMobil officials and Vice President Megawati Soekarnoputri.

Pertamina's management production sharing director, Iin Arifin Takhyan said the Arun LNG plant was slated for full operation by late July.

At full capacity, Arun's four LNG trains can fill up to 10 LNG cargoes each month, worth a total of US$100 million.

He said that U.S.-based oil and gas company PT ExxonMobil Oil Indonesia Inc., which abandoned the gas fields in mid-March due to security concerns, would return to Arun next week.

"The vice president instructed that after security conditions had improved, operation should be resumed; no more excuses for further delay," Iin quoted Vice President Megawati as saying.

"Now they (ExxonMobil) are mobilizing their people, and their equipment for deployment next week," he told reporters.

Earlier, he said a joint team of ExxonMobil and Pertamina had reported that security conditions in Arun had improved and the resumption of operations there would be safe.

A second ExxonMobil team was now present in Arun to assess the physical state of its gas facilities, he went on.

"They didn't tell us when they would resume operations, but our estimate is that if repair work needs to be done, they would take about three weeks, so we're targeting July 4," Iin said.

ExxonMobil spokeswoman Julia Tumengkol declined to confirm the news, saying the company would issue a statement on Monday.

The company pulled out from Arun, after armed groups, believed to be local rebel forces, attacked its operation.

The move forced the nearby Arun LNG plant to suspend operations as well, cutting off LNG shipments to Japan and South Korea.

Arun's natural gas is also used by fertilizer plants PT Pupuk Iskandar Muda, and PT ASEAN Aceh Fertilizer, both of which have yet to resume operations.

Iin said that ExxonMobil's return to Arun was at first aimed at reviving operation of the two fertilizer plants.

"We thought that resuming the LNG production would take longer, so we wanted to supply the gas to the fertilizer plants first," he explained.

Japan and South Korea have been left in the dark about their LNG supply, as Pertamina was unable to set a date for Arun's normal operation.

So far, the two countries have been receiving supplies from the East Kalimantan Bontang LNG plant, which has used its excess capacity to cover for Arun's shortage.

Pertamina has said that due to low energy demand in Japan and Korea, supply to these markets is safe for the moment. But the company warned that energy demand next month would pick up and outstrip Bontang's capacity to deliver.

Should this occur, Japan and Korea would need to scramble for supplies from other LNG producers, and in response might terminate their contracts with Pertamina.

Iin said that Pertamina would keep pressuring ExxonMobil to resume operations to enable it to resume the LNG supply from the Arun plant to Japan and South Korea in July.

The two companies, he explained, must honor their contracted obligations. While Pertamina is responsible for management, ExxonMobil is responsible for operations, he said.

Last week, Pertamina president Baihaki Hakim threatened that Pertamina would take over operations at Arun, if ExxonMobil failed to show concrete resolve to resume operations.

Iin said that threat was still valid.

Although the financial loss due to Arun's suspension is so far negligible, the greater damage lies in Indonesia's tarnished reputation as a reliable LNG supplier.

The Arun incident has come just as the country has been seeking to penetrate the Indian and Chinese LNG markets.(bkm/prb)