Pertamina struggling to buy LNG for fertilizer firms

State oil and gas company PT Pertamina is still struggling to purchase a cargo of liquefied natural gas (LNG) for fertilizer company PT Pupuk Iskandar Muda (PIM) in Aceh as the Ministry of Finance still blocks the use of state funds for the purchase.

Kardaya Warnika, chairman of upstream regulatory body BP Migas, said in a hearing with the House of Representatives on Thursday that the state firm had negotiated with a Middle Eastern producer on the purchase of a cargo of LNG for the July delivery.

But, the negotiations failed to produce a deal given that the Ministry of Finance had yet to approve the use of the LNG Trustee Fund for the purchase of the LNG by the time the deal was supposed to be signed.

Kardaya said Pertamina was currently negotiating with another LNG producer from Middle East.

?We have asked the Ministry of Finance to soon issue the letter of approval as the Cabinet has agreed on the use of the fund to purchase the LNG,? Kardaya said.

The government is seeking to buy LNG abroad to meet the needs of fertilizer firms in Aceh. The fertilizer firms are facing shortage of natural gas supplies following the decrease in the gas output in the province and the government would like to use the remaining gas reserves to meet its LNG export commitment to buyers in South Korea and Japan.

The LNG importation is seen as the short-term solution to the crisis now faced by the fertilizer industry in Aceh.

Kardaya said for the long-term solution, the government would push for the development of Blok A, which is jointly owned by American firms ConocoPhilips and ExxonMobil. The development of the block, which is operated by ConocoPhilips, is expected to solve the natural gas crisis in the province.

Kardaya said both ConocoPhilips and ExxonMobil were expected to submit the plan of development for the block this month.

The government has also asked ConocoPhilips to talk with PIM on the price of the gas that will be supplied from Blok A, ?so that both can sign the head of agreement as soon as possible.?

?Once the terms for the (production) splits have been agreed upon, ConocoPhilips will start the development of the block, which is expected to take two years to complete,? Kardaya said. (Alex)