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)