Indonesia expects ExxonMobil field to resume this week

Indonesia's Mines and Energy Minister said yesterday he expected ExxonMobil's gas fields in its rebellious Aceh province to resume normal operations this week. Production at the PT Arun NGL plant was hit after its top supplier ExxonMobil closed three fields on Friday due to security concerns, casting a cloud over one of Indonesia's biggest export earners.

"Security has been reinforced there," minister Purnomo Yusgiantoro told reporters. "We expect the gas fields and LNG operations can return to normal this week." "I have told our LNG (liquefied natural gas) buyers that we will do our best to fulfil our commitments. We still have excess capacity from our Bontang LNG centre. Therefore, we have not declared a force majeure." State oil and gas company Pertamina said on Sunday it had declared force majeure on LNG supplies from its PT Arun NGL plant, saying security concerns in the province had affected output.

Industry officials said buyers were already indicating their unwillingness to do future business with Arun on the same scale. "The problem that Arun is experiencing now will affect its future viability with regard to contract renewal," one industry source said. "Arun's 20-year contracts are gradually expiring and buyers are now demanding that the contracts be written for shorter periods of time and for smaller deliveries of LNG," he added.

Purnomo said exports from Arun were worth about 12 trillion rupiah ($1.2 billion) a year out of a total 30 trillion from LNG. The PT Arun NGL plant was barely producing LNG on Monday after ExxonMobil's field closures. The setback comes at a time of plunging confidence in Indonesia's economy because of political and social instability. But another industry source said confidence would be quickly restored if production resumed within the next week. "If supplies can resume... it might just prove to be a blip in confidence levels and its shouldn't have any long term ramifications," he said.

Indonesia said on Monday it was seeking LNG supplies, possibly from Malaysia and Australia, to help meet contracts following the plant closure. Australia's North West Shelf LNG venture is already talking to affected Arun customers and South Korea is seeking emergency supplies from other sources. Jakarta has been fighting Free Aceh Movement (GAM) rebels in the province for years and a ceasefire the two signed in June, has failed to curb the violence.

Indonesia's Defence Minster Mahfud M.D. told reporters on Monday Jakarta was considering a new security strategy for the turbulent province in northern Sumatra but ruled out hardline military tactics. "The government is considering a limited security operation in Aceh," Mahfud said. "For sure there will be no military operation." ExxonMobil says it has been a frequent target of attacks in Aceh. Almost a year ago some of its employees were briefly held hostage and about six months ago it evacuated families from the area.

ExxonMobil's fields are located near Lhokseumawe - 200 kilometres east of the provincial capital Banda Aceh. South Korea will continue discussions for emergency supplies of liquefied natural gas (LNG) with producers despite Indonesia's expectations that gas fields in restive Aceh province will resume normal operations this week, an Energy Ministry official said in Seoul yesterday.

"The ministry has not received word from Pertamina directly about its timetable to resume full operations at the Arun gas fields and PT Arun NGL plant," said the official. "We will continue talks with other suppliers." The ministry and officials at state-run Korea Gas Corp (KOGAS) have contacted Australia and the gas monopoly's existing long-term suppliers in Malaysia, Brunei, Qatar and Oman for emergency supplies of LNG after several gas fields were closed in Aceh at the end of last week. This forced a shortfall in production at the PT Arun NGL plant.

Despite assurances from Indonesia's energy ministry that Pertamina would meet its contracts to supply South Korea, officials at both the ministry and KOGAS told Reuters concerns over supply disruptions in the following months have not eased. "There is no guarantee normal production would resume this week or the next. The fact that there are problems with production in an area which supplies 20 per cent of South Korea's requirement makes us really worried," said an official at KOGAS.

The KOGAS official said he was unsure whether Pertamina could guarantee scheduled delivery of five cargoes totalling 283,000 tonnes in April and four cargoes totalling 227,000 tonnes in May. These cargoes were all scheduled to be loaded from Arun. The official said a senior executive from Pertamina's Far East Asian representative office in Tokyo was scheduled to arrive in Seoul on Thursday to discuss the possibility of shipping LNG from Bontang in East Kalimantan to make up for the shortfall at Arun. The visit could not be confirmed by Pertamina's Tokyo-based office.