Closures pose threat to Aceh's fertilizer plants

Closures pose threat to Aceh's fertilizer plants

JAKARTA (JP): Aceh-based fertilizer companies PT Pupuk
Iskandar Muda (PIM) and PT ASEAN Aceh Fertilizer (AAF) expect
monthly loses of up to Rp 85 billion (about US$8.5 million) as a
result of the closure of United States-based ExxonMobil's gas
fields in the troubled province.

AAF president Zaenal Soedjais said here on Monday the monthly
expenditures for workers' salaries and factory maintenance alone
could reach Rp 15 billion.

"We would also suffer a significant opportunity loss of about
$7 million a month from unfulfilled contracts," he said in a
hearing with House of Representatives Commission IX for financial
and development planning.

Zaenal said the closure of ExxonMobil's gas fields would mean
a production loss of about 120,000 tons a month for the two
fertilizer companies, and could mean an increase in domestic
fertilizer prices.

"But I do not know how much the price would increase, it would
depend on the market," he said.

The American oil and gas company shut down five of its gas
fields in Lhokseumawe, Aceh, on Friday due to security concerns
in the province.

ExxonMobil supplies 10 percent of its natural gas production
to Pupuk Iskandar Muda and ASEAN Aceh Fertilizer, as well as pulp
firm PT Kertas Kraft Aceh. The majority is supplied to liquefied
natural gas (LNG) producer PT Arun, which sell a large part of
its LNG to Japan and South Korea.

The president of state-owned Pupuk Iskandar Muda, Omay K.
Wiraatmaja, said the company's opportunity loss would not be as
great as AAF's because 95 percent of its fertilizer was sold
domestically, while the majority of AAF's fertilizer was
exported.

AAF produced 587,055 tons of fertilizer last year, of which 99
percent, or 567,027 tons, was exported.

"We may suffer a loss of about Rp 55 billion a month," he said
during the hearing, adding that his company's expenditures on
wages and maintenance were similar to AAF's.

However, Omay said if his company's factory was not
operational within a year, the country would be about 550,000
tons short of fertilizer, which PT Pupuk Sriwijaya, as its
holding company, would have to provide.

Besides production, the fertilizer companies also use natural
gas for fuel, and because of the stoppage in their supplies they
were unable to deliver their remaining fertilizer stock to
market.

Zaenal said AAF had about 25,000 tons of fertilizer that could
not be delivered because the larger part of the fertilizer had
not been packed. Omay said his company had about 8,000 tons of
undelivered fertilizer.

"Furthermore, if not properly treated the fertilizer could be
dangerous to the environment," Omay said, adding that the
factories needed at least 10 percent of their normal gas supply
of 60 million metric standard cubic feet a day to maintain the
factories.

"If our factories stop totally, the equipment will become
damaged from disuse," he said.

Omay said he notified state-owned oil and gas company
Pertamina and the related ministry of the problem.

He also said the stoppage in the natural gas supply threatened
the company's expansion project, PIM 2.

"If we stop for three months there will not be any project
equity, and there have been threats from the financiers that if
the situation continues they will not open the tap for the PIM 2
project," Omay said, stressing the need for the government to
quickly resolve the situation so ExxonMobil could reopen its gas
fields. (tnt)