Indonesia is seeking to allay concerns of Japanese and South Korean LNG buyers after announcing a decrease in contracted supplies for December from ExxonMobil Corp.'s Arun natural gas facilities in the worn-torn province of Aceh.
Indonesian government sources attribute the break in supply to depletion of reserves at the Arun gas fields. But other reports suggest that the cause is more likely ongoing security concerns, along with damage to facilities from earlier attacks by separatist guerrillas.
"We will honor our LNG contracts with foreign buyers. That is an important thing. But we have to supply domestic fertilizer factories in Aceh with natural gas as well," Kardaya Warnika, vice-chairman of industry watchdog BP Migas told reporters Nov. 11.
Kardaya said BP Migas would ensure that extra supplies of LNG are shipped to Japanese and South Korean buyers in January to make up for the lower supplies in December. Indonesia will source the extra gas from the Bontang LNG plants in East Kalimantan, Kardaya said.
Kardaya neither specified how much LNG Indonesia would actually offer in December to the LNG buyers who bought gas from the Aceh fields under long-term contracts, nor did explain why the buyers could not have extra supplies from Bontang in December.
Kardaya said the LNG export reduction was needed to meet demand from two state-owned fertilizer companies in Aceh.
Both fertilizer firms are running at low capacity due to shortages of gas from ExxonMobil Oil Indonesia (EMOI), Aceh's only gas producer. Both factories have complained for weeks about gas shortages that have left at least 1,700 employees without work—a dangerous situation in an already volatile region.
Indonesia energy officials attribute the reduced supply to steady depletion of EMOI's gas reserves over the past few years. That depletion is said to have reduced LNG production in Arun LNG plant, with only four of six LNG trains now operating. BP Migas has reportedly said that EMOI can supply only 1.36 bcfd in 2003 and that the supply will continue to drop to 800 MMcfd in 2007.
But gas shortages at the Aceh fertilizer factories actually began with the outbreak of fire at ExxonMobil's Arun plant on Aug. 27, which halted operations at gas field Cluster III-IV.
Operations at the field resumed the following day, but on Sept. 1, officials said production was just 60% of full capacity.
Both Indonesia and ExxonMobil said they were investigating the cause of that fire, which followed an Aug. 21 grenade attack on the Arun facilities. The earlier attack, attributed to separatist rebels, caused no injuries or damage but was the second reported since Indonesia's military launched a fresh offensive against rebels from the Free Aceh Movement in May.
Ten days before, on Aug. 11, a bomb exploded in a condensate burner unit at ExxonMobil's Cluster II. Government officials could not say how much time would be needed to restore Arun's output to full capacity following the Aug. 27 fire, but they said there would be no adverse effect on deliveries abroad.
