Exxon agrees Bontang takes over LNG supply to South Korea
Saturday, September 7 2002 - 04:16 AM WIB
"Basically Exxon agrees that Bontang takes over Arun?s LNG exports to South Korea," Pertamina?s director for upstream operation Muchsin Bahar said in Jakarta on Friday.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said earlier in the week that the government planned to switch the LNG oil supply from the Arun plant to South Korea to the East Kalimantan-based LNG plant due to a continued decline in gas reserves in the troubled province.
The minister said that the LNG production from Arun would be focused to supply local buyers including PT Pupuk Iskandar Muda II fertilizer plant, PT ASEAN Aceh Fertilizer and PT Kertas Kraft Aceh. The LNG is sold to the local companies at between US$1 and US$1.8 per million metric British thermal unit (mmbtu), and US$3.5 per mmbtu to Korean and Japanese buyers.
Muchsin said that Exxon, which operates massive gas fields in Aceh to feed the LNG plant and one of the owners of the LNG plant, supported the government?s plan to switch the LNG supply to Bontang as long as the change would not affect its revenue. At present Arun sells its LNG to local buyers at subsidized prices.
"Pertamina and government are still discussing solution to ensure that Exxon?s revenue will not be affected if Bontang takes over Arun?s LNG exports to Korea," he was quoted as saying by the newspaper.
However, oil and gas analyst Kurtubi said that Exxon?s demand was unrealistic. "Exxon should be realistic with its supply capacity and the government should not just accept the demand," he said, adding that it was not fair if Exxon demanded the switch in the supply should not affect its income.
"Remember last year when Bontang took over all Arun?s exports. All the cost resulting from the switch in the supply were covered by the government, and Exxon had never repaid it," he said.
Exxon which is 55 percent owned by Pertamina, 30 percent by Exxon and 15 percent by Japan-Indonesian LNG company stopped operation for several months last year due the escalation of arm conflicts between the government security forces and the separatist group in the province.
All the company?s LNG export commitments were then fulfilled by the Bontang plant which is 55 percent by Pertamina, 20 percent by VICO, 15 percent by Japan-Indonesia LNG company and another 10 percent by TotalFinaElf. (*)