Pertamina halts 2nd part Bontang LNG contract extension talks with Japanese buyers

State oil and gas company PT. Pertamina said on Thursday it had temporarily halted negotiation to part of the 12 MTPA Bontang LNG contract that would expire in 2010 with Japanese buyers until it gets clear direction from the government whether further LNG export would be allowed.

?Pertamina is currently finalizing negotiation with buyers from western part of Japan to extend the 6 MTPA contracts that would expire in 2010 for another 10 years, but Pertamina has decided to halt extension talks for another 6 MTPA until we get clearance from the government,? Pertamina marketing director Ari Soemarno told reporters.

Pertamina is appointed by the government as sole marketing agent for Bontang LNG.

The government is mulling to cut LNG export to ensure supply for domestic users such as fertilizer firms and power plants. Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that decision about the matter would come from cabinet decision.

The government is planning to build 1000-km pipeline that would connect gas-rich East Kalimantan to industrial provinces of Java with capacity to flow 1 BCFD of natural gas, a project that many industry players said would be too costly to implement.

Upstream regulator BPMIGAS chairman Kardaya Warnika earlier said that if the pipeline project is to be implemented, LNG export must be reduced as East Kalimantan gas reserves are currently not adequate to meet all gas requirement for Bontang LNG plant and pipeline project.

Report said that former Coordinating Minister for Economy Aburizal Bakrie had sent letter earlier this month ordering Pertamina to stop LNG contract extension negotiation.

Indonesia is currently the world?s largest LNG exporter, supplying 25 MPTA annually from Arun LNG in Aceh and Bontang to its north Asian customers. But Indonesia is faced with serious gas shortage problems as Arun reserves are declining and East Kalimantan gas producers Chevron and Vico Indonesia are unable to produce enough gas to meet contract requirement, forcing Bontang to cut 36 cargoes this year and further 43 cargoes next year. Only French giant Total Indonesie could produce gas up to its commitment of 2.7-2.8 BCFD this year.

The decision to halt LNG talks came amid high demand for Indonesian LNG and eagerness of Japanese buyers and buyers from other counties to get LNG supply secured. ? Japanese buyers are very eager to get the second 6MTPA contract extension secured,? said BPMIGAS deputy chairman in charge of marketing Eddy Poerwanto said. ?But we have to get clear direction from the government whether Bontang is allowed to fully extend the 12MTPA contracts,? he said. Aside from Japanese buyers, he said, buyers from potential buyers Hong Kong, India, Mexico and USA had also expressed interest to buy Indonesian LNG. (godang)