ExxonMobil closure threatens LNG exports

JAKARTA (JP): Indonesia's liquefied natural gas (LNG) exports to Japan and South Korea are in danger of being cut after American oil and gas firm ExxonMobil Corp. temporarily halted operations due to security concerns in Aceh.

The spokesman for state oil and gas company Pertamina's production sharing management directorate, Sidick Nitikusuma, said ExxonMobil closed its operations on Friday, causing a cut in the natural gas supply to PT Arun's NGL plant.

"ExxonMobil had to close five gas fields," Sidick told The Jakarta Post over the weekend.

Among the closed gas fields were Pasee gas fields A and B, and Lhoksukon gas field B, he said.

Because of the closed gas fields, he went on, ExxonMobil's gas production fell by about 30 percent to about 1.15 billion cubic feet of gas per day (bcf) from 1.6 bcf per day.

So far, he said, Arun was still able to ship LNG at a regular rate to its buyers in Japan and South Korea. The Arun NGL plant makes some 225 shipments a year with total earnings of more than US$1.8 billion.

"Arun has enough supply to hold on for only about a week or two," Sidick said.

In a related development, Pertamina said on Sunday it had declared a force majeure on LNG supplies from its PT Arun NGL plant.

"Yes, we have declared a force majeure (on PT Arun NGL)," a Pertamina official was quoted by Reuters as saying, adding that security concerns in the restive province on the northwestern tip of Sumatra island had affected output.

"The gas fields in Arun have already been shut and there is only half a cargo left which will be shipped on Tuesday," said the official who did not want to be named.

Sidick said the LNG plant consumed about 90 percent of ExxonMobil's natural gas production. The remaining 10 percent is supplied to fertilizer companies PT Pupuk Iskandar Muda and PT Asean Aceh Fertilizer and pulp firm PT Kertas Kraft Aceh.

Japan is Indonesia's largest LNG importer, followed by Taiwan and South Korea. These countries signed long-term LNG contracts with Indonesia covering periods of over 20 years.

Sidick said if Arun's LNG supply ran out, it would be the first time since 1978 that Indonesia was unable to meet its contractual delivery obligations to its LNG buyers.

"Because of our uninterrupted LNG supply we are known as reliable LNG exporters," he said.

He said Pertamina president Baihaki Hakim had sent letters to Pertamina's LNG buyers in Japan and South Korea to inform them of the situation.

He added that a resumption of the normal gas supply to Arun depended on when it was safe to resume operation of the five gas fields.

"The situation here will get worse if the government does not act soon," he warned.

Sidick said ExxonMobil decided to halt operations in the five gas fields to avoid the frequent attacks by Free Aceh Movement (GAM) rebels.

"Workers have been fired at, our buses were ambushed and we were attacked with mortars at our Point A operation center," Sidick said.

He said the company evacuated workers' families to Medan, North Sumatra, and Jakarta.

But the workers remained at the Point A operation center to maintain the production facilities and to avoid a total shutdown, he stated.

Sidick said transportation to and from the Point A operation center was difficult because of ambushes by GAM rebels.

Security concerns also have forced ExxonMobil to reduce the frequency of flights to its operation site.

Sidick said many pilots refused to fly to the area after GAM rebels opened fired on one of ExxonMobil's planes several months ago.

ExxonMobil's decision to shut down several of its gas fields confirms the fears of foreign investors about security problems in the territory.

Investment in Aceh has come to a virtual halt and economic activity have been scaled back to minimum as a result of years of fighting.

Machine-gun toting GAM rebels patrol the streets in towns where the military has lost control. And the death toll in Aceh has risen steadily since the government launched a crackdown on rebel forces earlier this month.

So far this year over 200 people have been killed in Aceh and some 1,000 people died last year, most of the fatalities civilians.

Sidick said that although the government deployed troops to ExxonMobil's operation site, they were restricted in their actions.

The soldiers at ExxonMobil cannot launch counterattacks, he said. "(The soldiers) are like sitting ducks here."

Antara news agency quoted the chief of the police's Meunasah Love II operation, Adj. Sr. Comr. Harunantyo, as saying that some 160 personnel from the military and the police had been stationed in the compound of ExxonMobil.

The GAM deputy chief for the Pasee region, Abu Sofyan, denied his men had forced ExxonMobil to shut down its operation. (bkm)