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)