Chevron declares inability to meet gas supply commitment
Wednesday, July 19 2006 - 07:43 AM WIB
?Chevron has officially declared an insufficiency of gas supply from its East Kalimantan operations. Chevron is hoping that other East Kalimantan gas producers would be able to increase their production to cover Chevron?s production shortage,? Suwito Anggoro, a senior Chevron official, said on Wednesday.
Bontang LNG plant is currently experiencing acute shortage of gas supplies as two of its suppliers, Chevron and Vico Indonesia, were unable to supply the contracted volume, causing Bontang to cut LNG shipments to Japan, South Korea and Taiwan. The shipment cuts are projected bigger in 2007 and 2008 as gas supplies from Vico is expected to be dwindling due to declining reserves and Chevron?s new gas fields will not be coming onstream until at least 2009. Only Total E&P Indonesie, currently Indonesia?s biggest gas producer, can meet production commitment from its Mahakam PSC.
Chevron is currently supplying 190 MMCFD of gas to Bontang from its East Kalimantan gas fields, far lower that the contracted volume of some 400 MMCFD. Total is producing some 2.6 MMCFD from Mahakam while Vico?s production is around 600MMCFD.
Chevron has established a foothold in East Kalimantan thanks to the acquisition of Unocal Corp. in 2005. Unocal has a number of operating fields in the area, including Attaka and West Seno and a number of undeveloped discoveries in East Kalimantan.
Based on the review of Unocal?s East Kalimantan reserves following the acquisition, Chevron concluded that Unocal?s earlier reserves estimate were grossly overstated, oil and gas upstream regulator BPMIGAS' chairman Kardaya Warnika said on Tuesday, adding that this had caused Chevron to review the development plan of Unocal's former discoveries.
Total E&P Indonesie has said it has no spare capacity to increase production to make up for Chevron production shortage. ?Total could not increase production as Mahakam PSC has reached plateau production,? spokesperson Ananda Idris said on Wednesday.
A BPMIGAS official said that Vico would also be unable to increase production as Vico?s Sanga-Sanga PSC is on the declining production mode.
Bontang LNG is currently the world?s largest LNG plant with the production capacity of 22 million tons per annum. Bontang?s LNG supply cut has forced its East Asian buyers to scramble for LNG supply from other places.
An industry source said that Chevron?s declaration of insufficient gas might trigger Bontang LNG buyers to file further complaints and even lawsuits for Bontang?s consistent inability to honor LNG supply contracts.(godang)