Part of Arun LNG Export to be transferred to Bontang

State oil and gas company Pertamina said recently it is planning to transfer part of South Korea's liquefied natural gas term loadings from Arun in Aceh to Bontang in East Kalimantan starting in 2003, Dow Jones Newswires reported.

The partial LNG export transfer from Arun to Bontang resulted from growing domestic gas demand from fertilizer plants in Aceh, Effendi Situmorang, Pertamina's senior corporate vice president for production sharing management was quoted as saying.

In catering to growing demand from domestic industries, Aceh will lose part of its LNG export revenue to East Kalimantan. The upside of this deal lies in increased job opportunities in a healthier local economy in Aceh, he said.

Conflicts in Aceh have posed security problems for gas operator ExxonMobil Oil Indonesia Inc., forcing it to halt production for five months in 2001, thus disrupting LNG exports from Indonesia . The long-standing dispute between local separatist group Free Aceh Movement and the military remains unresolved.

The transfer will affect 11 LNG cargoes, the equivalent of 32,450 billion British thermal units of gas, for the Korea II contract in 2003, and the volume is expected to rise to 14 cargoes for 2004-07, Effendi said.

Korea Gas Corp. holds the Korea II contract, which allows for dual- source loading.

The LNG volume affected from 2004-07 is 41,300 billion Btu each year, Effendi said. Each cargo comprises about 56,000 metric ton of LNG, the equivalent of 2.95 billion Btu, said an Kogas official, who hasn't been officially informed of the transfer plans.

The Indonesian unit of Exxon Mobil Corp. produces all the gas in Arun, and TotalFinaElf E&P Indonesie, a unit of TotalFinaElf S.A. supplies 60% of 3.77 billion cubic feet a day of gas liquefied in Bontang.

But an ExxonMobil spokeswoman said her company "wasn't aware of such a transfer arrangement," according to Dow Jones Newswires.

The change will cut Arun's LNG export entitlement, while increasing exports from Bontang. Bontang has the capacity to absorb the additional LNG export entitlements planned up to 2003-04, said an industry source, but not beyond. (*)