Bontang to further slash LNG shipment due to gas shortage

Bontang LNG plant in East Kalimantan will further cut LNG shipment to South Korea, Japan and Taiwan this year due to declining gas supplies.

Arie Soemarno, state oil and gas company PT Pertamina?s marketing director, confirmed that the LNG plant would further slash its LNG shipment, yet he did not provide details and disclose the reasons.

Sources said the new cut could amount to 10 percent of the total number of cargoes earlier agreed upon by Pertamina and Bontang?s buyers.

Early this year, Pertamina, which is in charge of marketing LNG from Bontang and the Arun LNG plant in Aceh, reached an agreement with Bontang?s buyers to reduce LNG shipment from Bontang by 42 cargoes to a total of 335 cargoes for this year.

?Yes, there will be more cuts from the number of cargoes that we have agreed upon with buyers,? Arie said on Friday.

An industrial source noted that output cut was due to the shortage of gas supplies from Total Indonesie, Unocal and Vico, the three companies that have been supplying the plant with gas for decades.

Total now produces its gas at the peak rate of 2.8 billion cubic feet per day (BCFD), while Unocal and Vico?s gas output now hover at about 200 million cubic feet per day (MMCFD) and between 600 and 700 MMCFD. The three?s gas output now totals about 3.7 BCFD, 400 MMCFD of which are delivered to industrial users in the province.

Vico saw its output declining by 16 percent, while Unocal?s output declined by 35 percent last year, according to the U.S. Embassy in Indonesia?s reports.

Vico initially planned to produce between 800 and 900 MMCFD this year, but the firm said in June that its output had dropped to 660 MMCFD.

The source said Total, Vico and Unocal were reluctant to increase their gas output given the uncertainties over the extension of several existing LNG contracts with Japanese buyers.

Pertamina and Japanese buyers are negotiating to extend several LNG contracts involving the shipment of a total of 12 tons of LNG per year, that are due in 2010. The negotiations, however, have moved at a snail?s pace as Japanese buyers insist on more flexible terms and a discount. (Godang)