Arun LNG plant hoped to operate at 50% this month

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)