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Indonesia short on LNG commitments

Indonesia said it may need to buy 54 spot cargoes of LNG between 2005-2007 to meet its overseas sales commitments. Indonesia is the world’s top exporter of LNG, but has been struggling to meet its contractual commitments for the super-cooled, compressed gas as output has declined and supplies have been diverted to the domestic market, mainly to fertiliser plants.
"Based on our calculation, we need nine LNG cargoes in 2005, 16 cargoes in 2006 and 29 cargoes in 2007. So in total it is about 54 cargoes," Mines and Energy Minister Purnomo Yusgiantoro told. "We are evaluating things now. The choice is whether we will swap the LNG cargoes to Bontang from Arun, buy [the cargoes from abroad], or ask for LNG supply delays to our buyers," he added.

Indonesia runs two export outlets at Arun in Aceh province in Sumatra and Bontang in East Kalimantan. Together, the plants have a capacity to supply 34 mm tpy of LNG to buyers in Japan, South Korea and Taiwan.
Purnomo also said the government was still in talks with LNG buyers to delay the supply of about six term cargoes this year. Analysts have estimated that Indonesia may have to buy upwards of 30 spot cargoes to meet its commitments in 2004.
"Although we are still negotiating for a delay with foreign buyers, we seem have no problem for 2004," Purnomo said.

An official at BP Migas, the state oil and gas watchdog, had said previously that Indonesia was in talks with Korea Gas (Kogas) and Japan’s Tohoku Electric Power to delay the cargoes due to demand from domestic fertiliser firms.
Kogas, the sole importer and wholesaler of LNG in energy-deficient South Korea, imports 5.3 mm tpy of Indonesian LNG under three long-term contracts. Tohoku Electric buys 3 mm tpy of the gas under a single long-term agreement. Indonesia had expected to export 25 mm tons of LNG this year to its Asian customers. It planned to deliver 355 cargoes from Bontang and 110 cargoes from Arun, BP Migas marketing chief Djoko Harsono said in January.

Each standard cargo contains 125,000 cm (4.4 mm cf) of LNG. One ton of LNG is equivalent to 2.32 cm. An industry source said it was unlikely Indonesia would divert supplies between Arun and Bontang.
"The only choice is to buy from abroad," the source said.
In 2003, Bontang delivered 355 cargoes and Arun shipped 115. Indonesia has Asia’s biggest proven gas reserves at more than 2.5 tcm, but analysts say a lack of investment has had led to a decline in production and other infrastructure problems such as pipeline corrosion.

Editorial Notes: Original headline: "Indonesia needs to buy 54 LNG cargoes between 2005-2007". -LJ

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