Indonesia could lose LNG contracts if Exxon still closed by July
Indonesia could lose LNG contracts if Exxon still closed by July
JAKARTA (JP): Indonesia could lose its liquefied natural gas
(LNG) contracts with Japan and South Korea if U.S.-based
ExxonMobil Oil Indonesia Inc. remains unable to restart its gas
operations in Aceh until June, state oil and gas company
Pertamina warned on Tuesday.
Pertamina president Baihaki Hakim said that Pertamina was thus
far still able to supply LNG to its Japanese and South Korean
buyers despite disruption in LNG production at its subsidiary PT
Arun NGL Co. in Aceh.
But, he said, Pertamina could only guarantee supplies to the
buyers until May.
When asked whether the buyers would terminate the contracts
and buy LNG from other countries if the state company was unable
to meet its supply obligation to them, Baihaki said, "That would
be only natural."
Last month, Exxon suspended its natural gas operations in Aceh
upon security problems caused by conflicts between local rebel
forces and the military.
The shutdown prompted nearby LNG plant PT Arun to stop
operations, forcing Pertamina to transfer the LNG orders placed
with the plant by its Japanese and South Korean buyers to the
Bontang LNG plant in East Kalimantan.
Baihaki noted that starting in June, the Bontang LNG plant
would not have excess supplies to help meet PT Arun's supply
obligations.
But, he said, Pertamina would refrain from declaring a force
majeure to its buyers.
He said although the Indonesian Army claimed it had
safeguarded ExxonMobil's site, Pertamina could not force the
company to immediately resume operations.
"Whether it's secure or not is relative, it's debatable," he
said.
"If you force them to work, and then an accident happens, you
could be sued in an international forum. Can we afford that?" he
added.
The military has dispatched three battalions to beef up
security at ExxonMobil's gas facility. But Baihaki said that the
military was restricted to guarding ExxonMobil's facility.
"The military is capable of guarding (ExxonMobil's) facility.
But the problem is (whether it can guarantee the security of the
workers) outside the facility," he said.
Baihaki said that the government and ExxonMobil would work on
the safety conditions the military could create, and under which
ExxonMobil would agree to resume operations.
He further said that Pertamina saw no pressing need to force
ExxonMobil to return its workers to Aceh.
"We still have time," he said.
He further said that ExxonMobil intended to reopen its plant,
dismissing allegations that the American firm was blackmailing
the government for an extension of its contract.
"They want to do it (resume operation) as soon as possible,
but they too cannot force their workers to return," he said.
As uncertainty lingers over Indonesian LNG supplies, one of
Japan's largest power companies said earlier that it was shifting
its natural gas procurement away from Indonesia.
To offset the shortfall in supplies from PT Arun, Tohoku
Electric Power Co. has increased orders for LNG from politically
more secure Malaysia.
ExxonMobil has said that it will maintaining its Aceh
operations in a state of "ready to start-up" in case the company
could soon reopen its plant. (bkm)