Indonesia eyeing term LNG contract to secure gas for Aceh fertilizer firm

Indonesia is planning to approach Middle East LNG producers to secure term LNG contract to secure gas supply for the gas-strapped Aceh fertilizer firm PT. Pupuk Iskandar Muda (PIM) to keep the plant running, a minister said on Thursday.

?We are approaching Qatar and Oman to try to get term LNG contract until at least 2008-2009, when ConocoPhillips-operated Block A gas block are ready to supply gas to PIM,? minister of state enterprises Sugiharto told reporters.

Sugiharto said that temporary solution by buying 1-2 swap cargoes of LNG would not be able to ensure permanent operations of PIM. ?We are currently trying to buy 1-2 spot cargoes from Oman or Qatar fro September delivery, but after that, we will be looking for more permanent solution (by seeking term contract),? he said.

He did not say the volume of the LNG Indonesia is seeking.

ExxonMobil Oil Indonesia, a unit of Us oil firm Exxon Mobil Corp. is the sole gas producer in Aceh. In the past, the firm had enough gas reserves to supply both Arun NGL and fertilizer firms in the province. However, following the decline in gas reserves, ExxonMobil has to stop supplies to PIM to maintain supplies to Arun, which has contracts to supply LNG to South Korea and Japan.

Under the swap scheme, ExxonMobil would supply gas to PIM by reducing supply to Arun. The reduced supply to Arun, which would result in less LNG cargoes produced, would be made up by overseas LNG supply.

Last Sunday, PIM got back gas supply from ExxonMobil of around 60MMCFD for two months, or equivalent to one LNG cargo. In return, PIM has to buy one cargo of LNG from the spot market to be delivered to the costumer of Arun NGL Co ?after August till the end of this year?. PIM will have to buy one cargo of LNG at international price.

The price now stands at $7.5 per million British thermal unit. PIM could now afford to pay high gas prices after the government allowed the company to export its products.

PIM?s gas shortage is expected to be fulfilled when Block A is being developed. Block A gas block. ConocoPhillips is finalizing plan of development for the block. But reports said Conoco and ExxonMobil, which has`50 percent interst each in the block, wanted to sell the block due to security reasons. (godang)