Exxon sets conditions to resume gas supply to AAF

ExxonMobil Oil Indonesia said it would resume gas supply to ASEAN Aceh Fertilizer (AAF) if the government agreed to reduce the company's export obligation (transfering it to other producer like Badak LNG plant in Bontang, East Kalimantan) and to sign a value retention agreement, Bisnis Indonesia reported on Monday.

AAF's president director Rauf Purnama said in Jakarta last week that the fate of the fertilizer plant would rely on the result of the negotiation that would be held between ExxonMobil, the Ministry of Energy and Mineral Resources and BPMIGAS, the government's agency which is in charge of oil and gas production.

"If the government agrees to sign a value retention agreement and take over part of Exxon's export commitment, we will be able to get the gas supply," he said, adding that the value retention is needed because the price of its gas sold to overseas buyers is far higher than if the company sells them in the domestic market.

According to Rauf, Exxon earns US$3 per MMBTU from its LNG export, which is far higher than US$1.85 if it sells the gas to AAF and other fertilizer producers. "Exxon therefore demands the government to pay the difference if it is asked to sell its gas to AAF," he said.

ExxonMobil terminated its gas supply contract early this year to AAF not only due to the price discrepancy but also due to the decline in the gas production. The existing production is only enough to meet its LNG export commitment. (*)