Pupuk Kaltim shuts down one of its fertilizer plants due to decline in gas supply

State owned fertilizer producer PT Pupuk Kalimantan Timur (PKT) has shut down one of its five urea fertilizer factories after state owned oil company Pertamina through its production sharing contractors cut down the gas supply to the fertilizer company, Kompas reported on Thursday.

PKT?s spokesman Teddy Nawardi said on Tuesday that Pertamina?s production sharing contractors had cut down the gas supply to the Bontang, East Kalimantan-based fertilizer company to 180 million cubic feet per day (MMCFD) from 220 MMCFD since August 14.

He feared that the gas supply which caused a decline in PKT?s urea production by 60,000 tons a month would be further reduced to 140 MMCFD. "If it happens it will severely affect the country?s rice production," he added.

Teddy said that he did not know the reason why the gas supply was cut down. Executives of gas producers which supply the urea fertilizer company also refuse to comment on the cut in the gas supply.

According to unnamed sources, some of Pertamina?s production sharing contractors which supply the fertilizer producer lowered the gas supply after PKT refused to buy the gas for one of its five fertilizer factories at commercial prices.

They said that PKT and the gas producers have signed sales contracts only for the four of the fertilizer producers. The fertilizer company buys the gas for the four factories at subsidized prices. The gas producers demanded the price for the gas supplied to another plant (one of the five plants) be based on prices in the market. PKT instead proposed to buy the gas at US$1.85 per mmbtu but the gas producers turned down the proposal and then cut the gas supply for the factory.

At present PKT which operates five urea fertilizer factories is one of the world?s largest urea producers. (*)