LNG exports to S. Korea and Japan to decrease
JAKARTA (JP): State oil and gas company Pertamina estimates its liquefied natural gas (LNG) exports will decrease by 4.2 percent this year following a slump in demand by South Korea and Japan amid the monetary crisis.
Pertamina's director of general affairs Hadi Daryono said on Monday the company's LNG exports would drop by 22 shipments to 501 shipments this year due to the crisis which has battered the region for more than one year.
One shipment comprises 125,000 cubic meters of LNG.
He said Pertamina's customer in South Korea, Korea Gas Corporation, had asked for a cut in LNG supplies from Pertamina by 18 shipments and Osaka Gas, one of Pertamina's many customers in Japan, asked for a reduction in supplies by four shipments, he said.
Hadi said Pertamina, understanding the difficulties faced by both customers in marketing LNG amid the crisis, agreed to reduce its LNG supplies to the companies despite the take-or-pay clause in their contracts, providing that both firms buy the shortfalls once economic recovery takes place in the countries.
"Both companies accepted such a condition," Hadi said.
Indonesia is the world's largest LNG exporter with customers including Korea Gas, Osaka Gas, Tokyo Gas, Hiroshima Gas, Toho Gas, Nippon Gas and Chinese Petroleum Corporation of Taiwan.
Pertamina's data reveals that the state company has signed several long-term contracts to supply Korea Gas about 5.2 million tons of LNG per year until between 2007 and 2017.
The state company has also signed several long-term contracts to supply Osaka Gas about three million tons of LNG per year until between 2010 and 2015.
Korea Gas earlier announced that it planned to export some of its imported LNG over the coming five years due to the weak domestic demand.
The company has contracted to import 78.4 million metric tons of LNG in the coming five years. But domestic demand is expected to reach only 65 million tons.
South Korea, the world's second largest LNG importer after Japan, will import 11 million tons of LNG this year from Indonesia, Malaysia and Brunei.
Saving
Hadi also said Pertamina was seeking to directly buy most of its crude oil and fuel demand from producers, instead of traders as part of its efficiency program.
He said Pertamina had signed one-year deals to buy crude oil from Saudi Arabia's Aramco and Malaysia's Petronas and would sign similar deals with other crude oil and fuel producers in the future.
"We are now seeking to make a similar agreement with Kuwait Petroleum for the purchase of gas oil," Hadi said.
Despite being a petroleum exporter, Indonesia imports about 70 million barrels per year for Pertamina's refineries. The country also buys about 15 percent of its domestic fuel consumption of 52 million kiloliters per year due to the limited capacity of Pertamina's refineries.
For more than one decade during Soeharto's presidency, Pertamina was forced to buy crude oil and fuels through companies linked to Soeharto's family and cronies. Pertamina was allowed by the government to chose from whom to buy the commodities starting July this year following Soeharto's downfall.
Pertamina signed last week a one-year contract for the supply of Malaysian crude oil to Indonesia effective Jan. 1, 1999.
The contract covers the supply of about 20,000 barrels per day of Malaysian crude oil on a delivered basis with Pertamina having the option to receive additional 600,000 barrels per month.
Prior to the contract, Pertamina bought a total of 7.6 million barrels spot shipments from Petronas since July this year.
"The direct purchase arrangements cost Pertamina less than if it purchased through traders," Hadi said, adding that Pertamina could save between 10 cents to 15 cents per barrel under direct purchase agreements.
He said Pertamina would still buy some portion of its crude oil and fuel demand from traders and purchases would be conducted through open biddings. (jsk)