Govt may extend gas swap agreement between two fertilizer firms

The government is likely to extend the natural gas supply swap agreement between two state owned fertilizer firms, PT Pupuk Iskandar Muda (PIM) in Nangroe Aceh Darussalam and PT Pupuk Kalimantan Timur (PKT) in East Kalimantan for another six months starting January 2009.

"We are likely to extend the swap agreement to ensure gas supplies for PIM. We are going to soon hold a meeting to talk about it," Director General of Oil and Gas Evita Legowo said on Tuesday.

PIM gets gas supplies from gas fields in Arun, Aceh operated by American energy firm ExxonMobil, while PKT gets the supplies from gas fields in East Kalimantan that also supply gas the Bontang LNG plant. The problem is that reserves at ExxonMobil's fields have considerably declined, while the firm has also to deliver its gas to the Arun LNG plant to meet the plant's export commitment. ExxonMobil is either to supply the gas to PIM or the LNG plant.

Under the swap mechanism, ExxonMobil will supply PIM with gas equal to two cargoes of LNG, while East Kalimantan's gas producers will cut a similar volume of gas supplies to PKT and convert the gas into LNG to meet Arun's LNG export commitment.

The swap agreement was first signed in 2005. (Bernard)