LNG shipments delay sends bad signals to investor

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

Indonesia's move to delay 51 export shipments representing more than 2.75 million tons of liquefied natural gas (LNG) would send a bad signal to investors and hurt the country's business competitiveness, a Japanese company affected by the decision warned.

Osaka Gas acting head of energy resources Yasuo Ryoki said on Wednesday such decision undermined the importance of the company securing a supply commitment which had been agreed to under a legitimate contract.

Speaking after delivering a speech at a gas conference here, Ryoki said that supply sustainability was the most crucial factor for companies before they draw up a business plan, even more important than "for example, price competitiveness".

On Tuesday, Indonesia gas firm PT Pertamina revealed it had decided to delay the shipment of 51 cargoes of LNG to buyers in Japan, South Korea and Taiwan -- the country's three largest LNG customers -- this year, of which 42 loads were from the Bontang plant in East Kalimantan and the other nine from Arun in Aceh.

The delay, which Pertamina blamed on a combination of a slight decline in gas output and a sudden need to reallocate the commodity to fertilizer producers, would cut Bontang's export commitments to 335 shipments this year, against Arun's 45.

Aside from Osaka Gas, other affected companies include Kansai Electric Power Co., Chubu Electric Power co., Tokyo Gas Co., and Korea Gas Corp.

Despite having officially accepted the delay, the company, Ryoki said, did not want to see a repeat in the future. Osaka Gas has a contract until 2010 to receive supplies of about 1.7 million tons of LNG a year.

Indonesia exports some 27 million tons of LNG annually.

During his presentation, Ryoki said that Indonesia needed to improve the management of its gas industry.

He said that currently, it was unclear whether PT Pertamina or the Oil and Gas Implementing Body (BP Migas) had authority to deal with gas buyers.

"Indonesia needs to have a single entity to accommodate buyers' demand," he said. Most buyers did not have a clue to whom they could address their problems, he said.

He underlined his company remained keen to keep its operation in Indonesia but asked for better management practices.