Pertamina still optimistic about Indonesia's LNG future

State oil and gas company Pertamina is still upbeat about the prospect of the country's liquefied natural gas (LNG) exports despite the closure of its Arun LNG plant in Aceh, which has dealt a blow to the country's reputation as a reliable LNG producer.

Pertamina said that using smart strategies, Indonesia still has a good chance of maintaining or expanding its market share despite the closure of the Arun LNG plant and the tougher competition launched by new producers such as Australia, Qatar, Malaysia and Brunei.

Indonesia, which is the world's largest LNG exporter, found almost no rivals in the regional LNG market over the past several decades.

"We are currently facing buyers market, which force us to be more flexible on new contracts," said the company's president Baihaki Hakim told reporters on Tuesday after a hearing with the House of Representatives' Commission VIII which oversees among others oil and gas affairs.

"The competition will force us to accept shorter contracts, such as 5 to 10 years, from the current 15 to 20 years contracts," he said.

He also said that Pertamina was ready to lower the volume buyers have to buy under the take-or-pay contractual term to as low as 50 percent from the current 90 percent.

Pertamina would also pay more attention at the spot market, which he predicted to emerge in Asia and the United States in 5 to 10 years.

Indonesia is currently facing stiff competition from Australia, Qatar, Brunei and Malaysia to supply 3 million tons per year of LNG to china and analysts of the industry said its chance to win the contract has been dwindling as the Arun closure had damaged its reputation as a reliable supplier.

PT Arun NGL Co was forced to halt production in March following the cessation of gas supplies from ExxonMobil Oil Indonesia Inc, a subsidiary of American energy giant ExxonMobil, which suspended its operation on security problems.

However, Baihaki said he remained optimistic on Indonesia's chance to win the China project and Indonesia would go ahead with its plan to develop the Tangguh LNG facilities in Irian Jaya and add another train to the Bontang LNG facilities, called the Train I, in East Kalimantan.

He said that Tangguh would be developed to be one of the world's most efficient and most able to compete with any suppliers.

" We still have some advantages that will help us to win the competition in the LNG market such as proximity to the consumers. And the Train I in Bontang would be able supply LNG to buyers at relatively low price, since the expansion cost would be far cheaper than grass root projects our competitors are developing," said Baihaki.

"Therefore, we will be able to cater to relatively small volume buyers, which require, let's say, 500,000 tons per year, " he said. (alex)