Govt to reschedule its LNG exports to S. Korea and Japan
Wednesday, December 8 2004 - 01:35 AM WIB
State Minister for State Enterprises Sugiharto said that the government and the state-owned oil and gas company PT Pertamina will reschedule LNG supplies to South Korea and Japan this month so that the gas demand can be met, the Bisnis Indonesia and the Koran Tempo reported on Wednesday.
This step hopefully will give guarantee to Aceh?s fertilizer firms regarding gas supply,? Sugiharto said on Tuesday.
Meanwhile, The Nihon Keizai Shimbun reported on Wednesday that the Indonesian government has decided to reduce the country's liquefied natural gas, or LNG, exports to Japan, South Korea and Taiwan in 2005 due to falling production.
The move may prompt major Japanese LNG users to accelerate diversification of supply sources. LNG is seeing growing worldwide demand as an environmentally friendlier alternative to oil and coal.
The resource accounts for around 14% of Japan's primary energy supply, with imports coming to about 58.47 million tons in fiscal 2003. Indonesia has been the biggest supplier, satisfying roughly 30% of Japan's demand. Japan was to buy 16 million tons of LNG from Indonesia in 2005, but export cuts will likely reduce the volume by 11%, or 1.74 million tons.
Cuts for the South Korean and Taiwanese markets are believed to total 1 million tons and 600,000 tons, respectively.
The Indonesian government has notified 11 Japanese firms, including Chubu Electric Power Co., Kansai Electric Power Co. and Osaka Gas Co., as well as electric power and gas companies in South Korea and Taiwan.
Kansai Electric Power, which relied on Indonesia for nearly 70% of its LNG imports in fiscal 2003, has swiftly decided to make up for the expected shortfall by buying from other electric power and gas companies.
Osaka Gas, which bought half of its LNG from Indonesia, plans to increase purchases from Malaysia, Brunei and others, in addition to boosting buying on spot markets.
Purchasing LNG on spot markets at higher prices may push up energy costs and affect consumers.
According to an energy industry expert, it is extremely unusual for an LNG producer to unilaterally request a contractual change without consulting buyers, because stable supply contracts running for 20 years-30 years are the norm.
But dwindling output at the Arun gas field in Sumatra and a fire in June at a plant in Bontang, Kalimantan, are believed to have made it impossible for Indonesia to meet its existing export contracts.
The Bontang plant isn't expected to resume full operations until late 2005.
To make matters worse, Indonesian government authorities are considering supplying LNG from the Arun gas field to a local state-owned fertilizer company at the expense of export markets.
The Indonesian government is reportedly negotiating to buy 360,000 tons of LNG from Oman and Qatar to reduce the scope of export cuts. (*)