Total E&P Indonesie may cut Mahakam gas flow

April 16, 2009
Total SA's Indonesian unit Total E&P Indonesie may reduce production of natural from its Mahakam block offshore East Kalimantan by 5% this year due to decreased demand for LNG from major Asian buyers.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 16 -- Total SA's Indonesian unit Total E&P Indonesie may reduce production of natural from its Mahakam block offshore East Kalimantan by 5% this year due to decreased demand for LNG from major Asian buyers.

"We might reduce production if we do not succeed [in selling] more gas to the spot markets," said Total E&P Indonesie Pres. Director Elisabeth Proust. "We hope that we don't reduce a lot, maybe only about 5% of our average yearly production. We will do the maximum not to reduce the production."

Proust noted that the normal output of 2.6 bcf was being maintained on the block for now. Total is operator with a 50% stake, while Japan's Inpex holds the other 50%.

The Mahakam block supplies 80% of the gas for Indonesia's Bontang liquefaction plant, operated by PT Badak NGL, which has been producing LNG for export to Japan, South Korea, and Taiwan.

Proust said Total had taken several steps to offset the problem of oversupply due to reduced demand from the three Asian nations, saying that another branch of Total and state-owned PT Pertamina had won a deal to sell one cargo of LNG to India.

She also said Total and Pertamina were trying to arrange with BP, the operator of Tangguh gas field in Papua, to ship two cargoes of the LNG to China if BP could not meet its own production schedule.

If Total and BP agree on the swap arrangement, the first cargo would be delivered in April and the second one in May. According to Proust, however, this arrangement "is still under discussion."

Earlier this month, Indonesia said it had sold three of the 18 cargoes of LNG originally bound for Japan, Taiwan, and South Korea.

"One cargo sold to India, and two were for PT Pupuk Iskandar Muda," according to Djoko Harsono, junior deputy for financial economy and marketing at BP Migas, Indonesia's oil and gas regulatory body (OGJ Online, Apr. 9, 2009).

Contact Eric Watkins at [email protected].