ExxonMobil closure threatens LNG exports

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)