State-owned Enterprises Minister Dahlan Iskan wants the government to allocate gas from the North Sumatra offshore (NSO) block and the B block operated by US-based ExxonMobil to state fertilizer producer PT Pupuk Iskandar Muda (PIM).
“The gas from the blocks is now used to make liquefied natural gas [LNG] at the Arun LNG plant [in Aceh]. The LNG is all exported. We want the gas to be delivered to PIM so that the company can operate at full capacity,” he told reporters in Jakarta on Tuesday.
The fertilizer producer was currently operating for only about six months a year due to gas shortfall problems, Dahlan said.
State oil and gas firm PT Pertamina has repeatedly voiced plans to convert the Arun LNG plant to a LNG receiving terminal, which would supply gas to PIM, PT ASEAN Aceh Fertilizer (AFF) and paper producer PT Kertas Kraft Aceh (KKA).
ExxonMobil, the operator of the two blocks and the Arun LNG plant, is currently selling the assets, as the production was no longer economic for the company. The two blocks currently produce 164 billion British thermal units of gas per day (bbtud).
However, Dahlan said that he doubted that the companies, particularly PIM, could buy LNG at the market price of around US$11 per million British thermal units (mmbtu) if the government granted its approval of Pertamina’s plan. At such prices, the companies would suffer huge losses due to poor operational competitiveness.
To make the operations competitive, Dahlan said he would ask the Energy and Mineral Resources Ministry to allocate Exxon’s gas to PIM directly from the blocks via a pipeline.
“The price will be less costly. The Bontang LNG field in East Kalimantan will then deliver LNG to Exxon’s customers abroad under a swap mechanism.”
According to Pertamina, PIM required 110 bbtud of gas to operate at full capacity, while AAF needed 60 bbtud and KKA needed 15 bbtud.
Dahlan said the remaining gas from the blocks could be channeled to state power company PT PLN’s nearby gas-fired power plants.
Rangga D. Fadillah and Esther Samboh, The Jakarta Post.