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Fri, 08 Jul 2005

JP/PIM to get LNG supply from Exxon

PIM to get LNG supply from Exxon

Leony Aurora, The Jakarta Post, Jakarta

Fertilizer producer PT Pupuk Iskandar Muda (PIM) will receive gas equal to one cargo of liquefied natural gas (LNG) from ExxonMobil Indonesia if the government can guarantee the provision of a replacement cargo in the near future.

PIM president director Hidayat Nyakman said on Thursday there was not yet an official contract securing gas supply for its fertilizer plants, located in Nanggroe Aceh Darussalam.

"Exxon has an inventory of raw gas equal to one cargo, which is enough to run one plant for between 50 and 60 days," he said in a telephone interview.

"Exxon is willing to supply gas starting from July 11, providing the government -- through BP Migas (the Oil and Gas Upstream Regulatory Agency) -- guarantees a replacement," he added.

Head of BP Migas Kardaya Warnika confirmed the plan, saying that the government would "borrow" gas from Exxon to save PIM from closing down once it runs out of gas -- a vital substance in the production of fertilizer -- in three days.

"We will pay for the gas according to market prices," said Kardaya.

The fertilizer firm's contract with Exxon to supply natural gas at US$2.3 per million British thermal unit (mmbtu) expired at the end of last month. So that PIM can afford gas at higher prices, the government has ruled it can export all of its products.

However, even with higher global prices, PIM can only pay $6.55 per mmbtu at the highest, or about $19 million per cargo.

Hidayat said the fertilizer firm would pay $7 million for a cargo, while the government would cover the rest. When PIM starts exporting its products, he said, it would reimburse the state.

State oil and gas firm Pertamina, which has been tasked with finding an LNG cargo in the spot market, has on several occasions been forced to let go of a cargo as the government did not come up with the funds in time.

PIM has two plants, each with a production capacity of 1,700 tons per day. Due to its lack of natural gas supply, the company has been operating one plant at a time.