ExxonMobil signs gas supply agreement with Aceh?s fertilizer firm: UPDATE 1

(Add comment on Bontang's capability to meet Arun's supply obligation)

PT ExxonMobil Oil Indonesia (EMOI), the subsidiary of American giant ExxonMobil, signed on Friday an agreement to supply natural gas to fertilizer firm PT Pupuk Iskandar Muda (PIM) in Aceh.

As a result of the agreement, EMOI will cut gas supplies to liquefied natural gas (LNG) producer PT Arun NGL Co. This will lead to the decrease in LNG production in Arun

Chairman of upstream authority BP Migas Rachmat Sudibyo said that as a result of the declining output, Arun would transfer the order from its customers for nine cargoes of LNG to the Bontang LNG plant in East Kalimantan next year.

?Arun plant will only produce about 66 cargoes (of LNG) from 75 cargoes initially planned for next year,? Rachmat said during the ceremony to sign the agreement in Jakarta

One cargo contains between 56,000 to 60,000 tons of LNG.

PIM could not fully operate for many months due to the lack of gas supply from EMOI, the sole gas producer in the province. EMOI, which has seen its gas reserves declining over the past several years, cut gas supplies to PIM so that the Arun LNG plant could produce enough LNG for its customers overseas.

Following protests from the Aceh people and other parties, the government has finally decided that EMOI should give priority to domestic consumers.

According to PIM?s director of engineering and development Lili Djadjuli, under the agreement signed on Friday, EMOI will supply about 67 million cubic feet per day (MMCFD) of gas to PIM?s first unit (PIM I) for a six-months period at a price of US$2.3 per million British thermal unit.

EMOI was also committed to supplying gas to PIM?s second unit (PIM II), which is expected to complete commissioning tests by February next year.

Lili also said gas supply from EMOI to PIM units is expected to peak at rate of 117 MMCFD by March.

Commenting on the transfer of LNG purchasing order from the Arun LNG plant to the Bontang LNG plant, BP Migas marketing head Djoko Harsono said it would not easy for Bontang to meet the order.

?Technically, it won't be easy for Bontang to add LNG cargo shipment because there will be no significant increase in gas supplies (for the plant) next year,? Djoko said.

Bontang LNG plant receives gas supplies from French company Total E & P Indonesie, US Unocal Corp., and Vico. According to industry sources, Bontang plant has the capacity of producing about 240 cargoes of LNG per year. (Godang/alex)