JP/13/FERTILIZER

JP/13/FERTILIZER

Govt to allow Aceh fertilizer producers to export production

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.