RI forced to become LNG middleman as Arun runs out

Fitri Wulandari, The Jakarta Post, Jakarta

The Oil and Gas Upstream Regulatory Body (BP Migas) said on Thursday it was looking to buy liquefied natural gas (LNG) from rival gas-producing countries to supply its own buyers because the country's LNG plant in Arun, Aceh could not meet export commitments due to declining natural gas reserves.

The decision was also made in order to provide natural gas to fertilizer firms in Aceh, who are facing a shortage, according to BP Migas' deputy head Kardaya Warnika said.

He said the agency may be forced to buy LNG from rivals Malaysia, Nigeria and Qatar to meet supply commitments to South Korean and Japanese buyers. The buyers have refused Indonesia's offer to delay shipments of LNG from Arun, scheduled for the first quarter and second quarter of this year.

"We are negotiating with Malaysia, Nigeria and Qatar," Kardaya told reporters.

LNG production in Arun has been declining due to the depletion of its gas reserves, he added.

The depletion has forced PT Arun NGL Co. to quit operating some of its LNG trains in Lhokseumawe, Aceh province. The company is 55 percent owned by state oil and gas firm Pertamina, 30 percent by U.S. company Exxon-Mobil Indonesia and the remaining 15 percent by Japan-Indonesia LNG Co.

Indonesia has another LNG plant in Bontang, East Kalimantan. But, at present, the plant has no surplus capacity to cover for Arun's shortfall.

Kardaya said he hoped that by buying LNG from other countries to meet Arun's commitment to buyers, natural gas from Arun could be used to supply fertilizer firms ASEAN Aceh Fertilizer (AAF) and PT Pupuk Iskandar Muda (PIM) as well.

AAF which is owned by the governments of Indonesia, Malaysia, the Philippines and Singapore, stopped operating in August but resumed operations in December only to stop again several days later when the natural gas supply was halted.

PT Pupuk Iskandar Muda currently only operates one of its two production plants because of a decreasing supply of gas.

The 2,300 workers from the two firms are concerned about possible lay-offs if operations do not resume soon.

They warned that should they lose their jobs, it would add to the problems of the province, which has been torn by the war between the military and the armed separatist group struggling for independence.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said Megawati had made the suggestion to end the natural gas shortages in Aceh province at a Cabinet meeting on Wednesday.

But Purnomo failed to give details on what sort of suggestions were given by Megawati.

He only said the solution to the problem should consider macroeconomic aspects, fiscal aspects and socio-political interests.