PIM to shut down due to lack of gas

Leony Aurora, The Jakarta Post, Jakarta

State fertilizer firm PT Pupuk Iskandar Muda (PIM) in Nanggroe Aceh Darussalam will have to close down in a week because it does not have the money to secure a gas supply, a top executive says.

President director Hidayat Nyakman said on Friday the gas supplied by ExxonMobil Indonesia, whose contract with PIM expired at the end of June, was only enough to last until July 8, at the latest.

"After that, we will have to stop operations," he said.

The government had hoped to reschedule shipments of liquefied natural gas (LNG) to overseas customers and divert the LNG, a key raw material, to fertilizer plants in Aceh.

However, Japan and Korea refused the rescheduling because prolonged winters in those countries increased demand.

Eager to keep the fertilizer plants running, the government asked state oil and gas firm PT Pertamina to purchase LNG on the international spot markets. The plants would then be allowed to export their products so they could afford the more expensive gas.

"We tried to join a tender, but we could only bid US$6.55 per mmbtu (million British thermal unit)," said Hidayat. "That was only the floor price in the tender."

LNG in the competitive spot market currently sells for about $7 per mmbtu. PIM, which has two plants each with a capacity of 1,700 tons of production per day, used to buy gas from Exxon at $2.30 per mmbtu.

Hidayat said $6.55 was the highest price the company could afford.

To purchase enough LNG to keep the plants running through July and August, PIM has prepared $7 million and the government another $16 million as an advance, which will be repaid once the company starts exporting its products.

However, it is not clear whether this is enough money to purchase the amount of LNG needed by the plants. Pertamina has said that one cargo of LNG, about 2.9 trillion btu, costs about $27 million in the spot market.

Hidayat said he had reported the company's difficulties to the Office of the State Minister for State Enterprises.

"They will try their best to keep us afloat," he said, but fell short in specifying what measures the office might take.

PIM has been operating only one of its two plants at a time to conserve gas. Another fertilizer plant in the province, the Asean Aceh Fertilizer, ceased much of its operations two years ago due to a lack of natural gas.