Ministry of Finance refuses to finance LNG purchase

The Ministry of Finance has turned down state oil and gas company Pertamina?s request for funds to buy LNG overseas to meet Indonesia?s commitment to buyers

A Petromindo source said following the ministry?s refusal to finance the LNG purchase, the government was considering other options to solve the shortage of LNG supply.

?Most probably, the government will order the cuts of gas supplies to PIM (fertilizer firm PT Pupuk Iskandar Muda), so that the Arun LNG plant can get additional gas supplies to meet its commitment to buyers,? the source said on Tuesday.

Pertamina needs to import LNG from other countries to meet its export commitment to its buyers. The shortage of the LNG supply occurs because EMOI, the supplier of the Arun LNG plant in Aceh, has been asked by the government to allocate part of its gas to fertilizer producers in the province.

As a result, the plant has suffered a shortage of gas supply to meet its export commitment. The plant needs to buy nine cargoes of LNG from other countries to meet its export commitment to buyers throughout the year, including one cargo for April delivery.

Pertamina?s marketing and trade director Ari Sumarno earlier said that the firm had failed to buy a cargo of LNG from Qatar and is approaching LNG producers in Africa.

He noted that it was difficult to buy LNG at present given the ?tight market?.

The source noted however said Pertamina?s failure was due to the Ministry of Finance?s refusal to finance the purchase.

He further said that should the government finally decides to cut gas supplies from EMOI to fertilizer companies in Aceh, the Arun LNG plant would start increasing its LNG production at the end of April or early May.

Thus, Indonesia still needed to find LNG supplies from other sources to meet Arun?s commitment to buyers for the May-June period, during which South Korea and Japan anxiously needed LNG given the winter season, according to the source.

?Meanwhile, the LNG market is quite tight now. This means Indonesia will face great difficulties to meet its commitment to buyers, even if there is an additional gas supplies to Arun (LNG plant),? the source said. (Alex)