INDONESIA LOOKING FOR NEW LNG BUYERS

By Andi Abdussalam

Jakarta, March 16 (ANTARA) - The government will seek alternative buyers for the country's liquefied natural gas (LNG), or convert unsold LNG into liquefied petroleum gas (LPG), if traditional importers overseas reduce their LNG intakes from Indonesia.

        As LNG importers abroad are predicted to reduce their purchases from Indonesia, the government needs to find alternative buyers or convert some of its LNG production in an effort to avoid full capacity, tank-top production.

        "Stocks have not yet reached the tank-top level but at least we already have the first warning. If it is left unheeded it could reach that level which will force us to stop LNG well operations. If this happens it will pose a problem because it is very difficult to reactivate the wells," Energy and Mineral Resources Minister Purnomo Yusgiantoro said here on Monday.

        Previously, the head of the Upstream Oil and Gas Regulating Body (BP Migas), R Priyono, expressed worry that LNG importers in Japan, South Korea and Taiwan would reduce their purchases from Indonesia due to the current global financial crisis.

        The three countries are reportedly intending to cut their LNG imports from Indonesia by about 15 shipments or about 45 million million British thermal units (mmbtu).

        A cut of LNG imports of that volume from Indonesia's Bontang refinery plants in East Kalimantan, would reduce state revenues. Besides it would also cause the refinery's production to reach its tank-top capacity level.

        However, Energy and Mineral Resources Minister Yusgiantoro said at present Indonesia's LNG production had not yet reached the tank-top level. But he had asked state-owned oil and gas firm Pertamina and BP Migas to seek alternative buyers.

        Japanese importers which are usually called Western Buyers have indicated they would cut their LNG imports from Indonesia by three to six shipments, while Korea Gas had also signaled it would reduce its imports by six shipments. In addition, the Chinese Petroleum Corporation of Taiwan is reportedly also planning to slash its LNG imports by three shipments.

        One shipment of LNG is equal to three million million British thermal units (mmbtu). Thus, the combined potential cuts in the LNG imports of those countries from Indonesia would be about 15 shipments or about 45 million mbtu.

        Actually early last month, Pertamina, Total E&P Indonesie and Inpex Corporation extended their contracts on sales of LNG from Bontang to six Japanese companies.

        The extended contracts in the form of a Head of Agreement (HoA) were signed in Osaka, Japan, at the end of January 2009.

        The six Japanese companies are Chubu EPC, Kansai EPC, Kyushu EPC, Nippon Steel Co Ltd, Osaka Gas Co Ltd and Toho Gas Co Ltd.

        According to Priyono, the renewed contracts would expire after 10 years or between 2011 and 2020. The volume of LNG stipulated in the contracts reached 25 million tons, consisting of three million tons that should be shipped per annum for the first five years.

        Of the three million tons, two million will be shipped under cost, insurance and freight(CIF) terms and one million tons under free on board (FOB) terms.

        In the second five years, the LNG shipments would be carried out with two million tons per annum. One million tons will be shipped under the CIF condition and one million others under the FOB term.

        Yet, with the indication of importers to cut their LNG imports from Indonesia, the government has to seek alternative buyers or convert some of its LNG into LPG production.

        Yusgiantoro said so far no LNG importers from the three countries had officially notified its intention to reduce its imports from Indonesia.

        "But the importers have indicated that they will reduce their LNG imports as a result of the declining performance of their industries due to the global economic crisis," the minister said.

        BP Migas Head R Priyono said if the importers did cut their imports from Indonesia, the government would do its best to find new LNG buyers and convert the gas commodity to LPG in order to meet the need for gas of domestic fertilizer companies.

        "We already have the experience to convert LNG to LPG. We have the experience in the past to switch LNG to LPG using a converter," he said.

        In the meantime, Pertamina expects to obtain 5 to 6 additional LPG shipments from the Bontang LNG plant in East Kalimantan for its kerosene-to-gas conversion program.

        Pertamina's deputy director for commercial and marketing affairs, Hanung Budya, said recently his company had held negotiations with PT Badak LNG to get additional gas supplies because the latter had an LPG production surplus.

        The LPG, which was produced out of the conversion of natural gas in the Bontang field, is equal to 300 metric tons, or about 40 metric tons per shipment. If agreed, the additional LPG supplies would begin to be shipped in May and continue until the end of this year.

        With the additional supplies, the national need for 2.5 million tons of LPG in 2009 could be met. "This is in addition to the supply of gas under a contract with Petredec which supplies 800,000 to 1 million metric tons per annum," he said.

        Pertamina's Commercial and Marketing Director Achmad Faisal said meanwhile, the company would continue to seek LPG suppliers beside Petredec.

        "We don't want to depend on one supplier only. We need a second supplier so that supply would be guaranteed," Faisal said.***2*** (T.A014/A/HAJM/16:25/a014) (T.A014/A/A014/A/A014) 16-03-2009 17:20:54