Government to allow Aceh fertilizer to export product
The Jakarta Post, Jakarta
Fertilizer plants in Nanggroe Aceh Darussalam will be allowed to export part of their production so that they can obtain higher prices and secure access to much-needed gas, a top official says.
Coordinating Minister for the Economy Aburizal Bakrie, as quoted by Antara news agency, said on Wednesday that Asean Aceh Fertilizer (AAF) as well as Pupuk Iskandar Muda (PIM) I and PIM II could export their products after meeting the demand in the province and neighboring North Sumatra.
"The demand in Aceh and Sumatra represents only between 30 percent and 40 percent of their capacities," he said, adding that the rest could be exported.
Many rice fields in tsunami-stricken Aceh cannot be planted at the moment due to the approximately 10 centimeters of salt deposited on the land after the giant tsunami hit late last year.
Separately, State Minister of State Enterprises Sugiharto told reporters that the fertilizer plants have agreed to buy liquefied natural gas (LNG) at over US$3 per million British thermal unit (mmbtu), almost twice the price usually charged for domestic gas supplies.
The plants could afford higher prices as fertilizer overseas was sold at between $220 and $250 per metric ton, while on the domestic market it was sold at $110.
"Higher gas prices are still feasible, then," he said.
"There is no reason for Pertamina and BP Migas not to be able to provide gas," he said, referring to state oil and gas firm PT Pertamina and the Oil and Gas Upstream Regulatory Agency (BP Migas).
If the two institutions could not fulfill the demand, the fertilizer plants would get their gas supplies from Brunei, he added. It was unclear if Brunei would offer LNG at a lower price or why it would do so.
The price of LNG on the international spot market stands at about $7 per mmbtu.
In total, AAF, PIM I and PIM II need 12 cargoes of LNG -- with one cargo containing about 125,000 metric tons of LNG -- a year to operate at full capacity.
The government decided late last year to reschedule the shipment of nine cargoes for overseas buyers from ExxonMobil, the operator of the aging Arun gas field in Aceh, in order to fulfill the demand from fertilizer plants in the province.
ExxonMobil had earlier committed another three cargoes to the plants this year.
The problems of LNG supplies hit the headlines once again after Pertamina announced that it had had to find one cargo of LNG to meet prior commitments to buyers in Japan, Taiwan, and South Korea in April after rescheduling talks failed.
The state firm told the media on Tuesday that it could not find a cargo for April due to the tight competition in the market.