Indonesia sees 2% decline in 2009 LNG output

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Jan. 6 -- Indonesia's LNG production is projected to decrease by more than 2% in 2009, largely due to a decline in the supply of natural gas to the country's Bontang LNG facility.

Indonesian officials said LNG output will fall to 349 cargoes of 125,000 cu m each in 2009 from 359 cargoes in 2008. The officials did not state which of the country's gas fields are facing output declines.

An official at the Bontang LNG liquefaction plant said production will drop to 307 cargoes in 2009 from 317 in 2008 due to decreased supplies, while an official at the Arun LNG plant said its production would remain unchanged from last year at 42 cargoes.

Gas production has been declining in Indonesia due to a lack of major investment. At the same time, the government has been promoting domestic gas use to offset the higher cost of importing oil.

However, other problems have arisen, with the country now struggling to meet its commitment to deliver LNG to offshore buyers—especially Asian buyers such as Japan and South Korea.

Last week, Indonesia said it was seeking nine cargoes of LNG in 2009 from the spot market to meet its contractual commitments to South Korea and Japan in 2009.

In early December, a government official said that Indonesia would buy five cargoes of LNG on the spot market in 2009, which it will ship to South Korean buyers.

Underlining the issue of increased domestic consumption, Raden Priyono, chairman of upstream oil and gas regulator BP Migas, said Indonesia would divert the gas it had previously intended for the South Korean buyers to PT Pupuk Iskandar Muda, a state-owned fertilizer company.

Contact Eric Watkins at hippalus@yahoo.com.

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