RI may buy LNG from Nigeria to supply Asia

RI may buy LNG from Nigeria to supply Asia

Bloomberg, Jakarta

Indonesia's state oil company, which expects liquefied natural gas (LNG) production from its plant on Borneo island to fall 10 percent this year, is in talks to buy cargoes from Nigeria to ensure supplies to customers in Northeast Asia.

"We are talking to Nigeria for replacement cargoes," Ari Soemarno, senior vice president of marketing and trading at state- owned PT Pertamina, said in an interview last week in Jakarta. He wouldn't say how many cargoes Pertamina plans to buy from Nigeria.

Production from PT Badak NGL, the world's largest LNG plant at Bontang in East Kalimantan, is falling from last year's 26 million metric tons because reserves in gas fields that supply the plant are being depleted faster than expected. Fields run by Vico Indonesia, a joint venture between BP Plc and Eni SpA, were the first to supply the plant when it started up in 1977.

Asia's shortage of LNG used by power plants is driving up prices and prompting producers in Nigeria, Trinidad and the Middle East to redirect supply earmarked for the U.S. before the Northern Hemisphere winter.

In the three months ended July 31, Australia, Malaysia and the Middle East sent 13 cargoes to the U.S., totaling 740,000 metric tons, Andy Flower, a U.K.-based independent LNG consultant, said last week. In August, at least seven cargoes, or 350,000 tons, were delivered from Nigeria, Trinidad and possibly Spain to Northeast Asia, he said.

"There has been a big switch-around between the early part of the northern summer and the last couple of months," Flower said. Korea Gas Corp., the world's biggest LNG buyer, "and the Japanese utilities are building stocks, which have been depleted during the summer. If the winter is cold then they will be in the market for more LNG."

In September, Soemarno said Pertamina bought six replacement cargoes from Oman and Qatar to meet export orders and had talks with buyers in Japan and South Korea about delaying deliveries.

Asia's inventories of LNG fell faster than expected after a hotter-than-usual summer in South Korea, Japan and Taiwan caused a surge in use of the fuel to power air-conditioners. Tokyo Electric Power Co., Korea Gas and other Asian buyers, who may use more than US$21 billion of LNG in 2004, have contracted for most of the region's new output until 2007.

The LNG shortage is driving prices higher in the Asian spot market for individual cargoes, said Park Jae Young, a manager in the LNG trading team at Korea Gas, declining to give details.

Korea Gas paid an average of $259 a metric ton for LNG last year and prices in the spot market rose to about $312 a ton, Lee Keum Woo, an official in Korea Gas's fuel trading team, said in August.