LNG exports to S. Korea and Japan to decrease

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)