Pertamina scrambles to find buyers for Arun?s LNG

State oil and gas company Pertamina is scrambling to find buyers for the liquefied natural gas (LNG) output of its subsidiary PT Arun NGL Co in Aceh following the suspension of purchase by South Korean gas firm Kogas.

Head of general affairs at Pertamina?s directorate of production sharing management Sidick A. Nitikusuma said on Monday that Pertamina was now offering eight or nine cargoes of LNG to be produced by Arun from August to October to Japanese firm Tepco and others.

Besides, Pertamina was continuing to persuade Arun?s customer from South Korea, Kogas, to buy again from Arun, he was quoted by Aceh-based daily Serambi Indonesia as saying.

Kogas has signed contracts to buy LNG from elsewhere until October this year following the recent stoppage of LNG production at Arun due the disruptions in gas supplies from ExxonMobil Oil Indonesia Inc.

The unit of American energy giant ExxonMobil Corp stopped its gas operations in Aceh in March due to security problems but resumed the operation two weeks ago.

Sidick said ExxonMobil would operate two of its four gas clusters in August, which could produce enough gas supplies to two of the six LNG trains owned by Arun. But Arun will only operate one train this month due the lack of buyers.

The excess of gas supplies would transmitted to two fertilizer firms of the area, that is PT Pupuk Iskandar Muda (PIM) and PT Asean Aceh Fertilizer (AAF), he said.

By the end of August, ExxonMobil is expected to operate all its four gas clusters and Arun will operate two trains with an output of four cargoes per month starting from September, according to Sidick.

Several officials of the ministry of energy and mineral resources earlier said Pertamina was likely to sell Arun?s LNG on the spot markets if its customers were still reluctant to buy again from Arun.

Economic and financial expert staff at the ministry Kardaya Warnika said selling the first batch of shipment from Arun through the spot market would be the best option now.

"The spot market is not worse nor better. Everything depends on the supply and demand," Kardaya said.

Selling LNG through the spot market has its own benefits and weaknesses. If the demand is increasing while supplies remain the same, or even decrease, then the spot prices will soar and that benefits producers selling in the spot market.

However, when the market is flooded with LNG, the price will surely drop, and that will effect LNG producers, Kardaya said.

Sources said Pertamina would face difficulties in selling Arun?s LNG on the spot market as the spot market constitutes only five percent of the world's total LNG market.

Currently, most LNG buyers have sealed long-term contracts of up to 20 years with LNG suppliers. Moreover, in this time of summer in LNG consuming countries, demand for LNG drops. (*)