Govt mulls transferring gas to Aceh

Govt mulls transferring gas to Aceh

Fitri Wulandari, The Jakarta Post, Jakarta

The government is considering taking liquefied natural gas (LNG) from Bontang LNG plant in East Kalimantan to cover the export commitments of Arun LNG plant in Aceh for the next three years to resolve the lingering natural gas shortage suffered by fertilizer firms in Aceh.

Under the plan, natural gas from ExxonMobil Oil Indonesia's (EMOI) gas field will be supplied to three Aceh-based fertilizer firms, which for the past several months have suspended operations due to the shortage of gas. EMOI is the sole natural gas producer in Aceh and its output has largely been dedicated to Arun for LNG production. (EMOI's supply contract with the fertilizer firms had previously ended in line with declining reserves at its gas field).

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that to fulfill the export commitments of Arun, it may take a total of 54 LNG cargoes from Bontang from 2005 to 2007.

"By taking LNG from Bontang to meet Arun's commitment to foreign buyers, the natural gas (from EMOI) can be delivered to fertilizer firms," Purnomo told reporters after a limited Cabinet meeting on Thursday.

However, Purnomo said the government was still studying the feasibility of the plan especially as Bontang may also need to supply LNG to U.S.-based energy company Sempra and Korean steel company Posco to cover the export commitment of the Tangguh LNG plant in Papua as the construction of the country's third LNG plant will only be completed in 2007.

Posco has clinched a deal to buy 600,000 tons of LNG from Tangguh, while Sempra will buy 3.7 million tons both starting in 2007.

Purnomo said that the shift of the export contracts from Arun to Bontang would cost the government around US$100 million per year to cover the price difference between the LNG dedicated for export and the domestic market.

He added that fertilizer firms in Aceh were expected to have normal natural gas supply in 2008 when the Block A gas field in Lhokseumawe, Aceh, operated by U.S. gas firm ConocoPhillips starts production.

Activities at the three Aceh fertilizer companies: PT Pupuk Iskandar Muda (PIM) 1, PT PIM 2 and Asean Aceh Fertilizer have been suspended for several months due to the gas supply problem.

EMOI has seen its gas reserves declining during the past few years. This has also affected the operation of Arun as it now only operates four trains out of 6 trains in Lhokseumawe.

At the moment, the government is importing LNG from other LNG producers to meet its commitment to Arun's LNG buyers and send some of the natural gas from EMOI to PT PIM 1.