Gas shortage feared due to strife in Indonesia Escalating anti-government violence in northern Indonesia could lead to gas shortages in Korea as Exxon Mobil has halted production of liquefied natural gas (LNG) in the region, officials of the Ministry of Commerce, Industry and Energy and Korea Gas Corp. said yesterday. Officials said that gas fields in Arun, in the state of Aceh, where violent clashes continue between government forces and the Free Aceh Movement (GAM), supply about 3 million tons of LNG annually to Korea, or 20 percent its requirements.

Korea has already received January and February deliveries amounting to 565,000 tons or 10 containers, but officials were uncertain whether Indonesia could honor further commitments, amounting to 2.4 million tons or 43 cargoes.

Owing to seasonal factors, officials said that the nation's LNG reserves are currently at their lowest of 280,000 tons. Given that the nation's daily consumption of LNG is around 60,000 tons, officials fear Korea could be faced with severe shortages by as early as April.

Officials said that the general public would be hardest hit, with an estimated 8.4 million households relying on LNG for heating and fuel this year, accounting for 53 percent of the total LNG consumption in Korea.

To cope with a possible LNG supply cut from Indonesia, the government has requested an emergency supply of LNG from countries such as Malaysia, Brunei and Australia.

It is also considering readjusting the operation schedules of thermal power stations so their LNG supplies could be used for home heating and fuel.

However, officials acknowledge that these are only stopgap measures.

"We should be okay until the summer season as there's only moderate demand for gas until then. But if the rebel situation in Indonesia is drawn out through October, Korea will face a serious gas-supply problem," a Gas Corp. official said.

Exxon Mobil, which operates four oil and gas fields in North Aceh in collaboration with Pertamina, an Indonesian oil and gas company, halted production last Friday over security concerns. According to a report from the AFP News Agency, Exxon Mobil sites have been the scenes of fights, and staff have been kidnapped and threatened.

Meanwhile, a government official said that an official of Pertamina based in Japan will visit Korea tomorrow to explain the situation in Indonesia.

http://www.koreaherald.co.kr/SITE/data/html_dir/2001/03/14/200103140009.asp

-- Martin Thompson (mthom1927@aol.com), March 13, 2001

Answers

March 15, 2001 Arun gas field halts LNG loading for South Korea

SEOUL (Agencies): A vessel scheduled to load 56,000 metric tons of liquefied natural gas from Indonesia's Arun gas field Wednesday for delivery to South Korea floats idle in Singapore waters, an official from state-run Korea Gas Corp. said on Wednesday.

"We are supposed to load today, but that's impossible...the Arun facility is closed..." he said. "(The tanker) is waiting around in Singapore."

The Kogas official said he was unsure exactly when it could begin loading as production from the Arun gas field had stopped due to security concerns. He said Indonesian officials had contacted Kogas and the government to inform them of the supply disruption.

A spokeswoman for ExxonMobil Oil Indonesia Inc., which is the sole natural gas supplier to PT Arun Gas and liquefies the natural gas before it is shipped to South Korea and Japan, said on Tuesday that the company suspended natural gas pumping at its three onshore blocks - Arun, Lhoksukon and Pase.

The three blocks produce a total of 1.6 billion cubic feet of natural gas daily. ExxonMobil Oil Indonesia is a unit of Exxon Mobil Corp.

The Indonesian government said Monday that it will meet LNG deliveries to South Korean and Japanese buyers with LNG from Bontang or will ask Malaysian and Australian producers to fill the shortage.

Indonesia PT Arun NGL's liquefied natural gas production has fallen by close to 90 percent from March 7 following a halt in onshore Aceh gas production, a company official told Dow Jones Newswires Tuesday.

The only source of gas supply is now derived from North Sumatra offshore platform which produces around 350 million cubic feet of gas daily, officials said.

PT Arun NGL's LNG inventory now stands at 399,900 cubic meters, enough for one more export shipment, the company official said, adding that part of the inventory is reserved for its fuel plant.

This leaves Kogas scrambling for substitute cargoes, the official said. Kogas had scheduled to load six LNG cargoes from Arun in March, each with a volume of 56,000 tons, he added.

Meanwhile, an official of ExxonMobil said in Singapore on Wednesday that Arun condensate output has also fallen to zero following the company's move to halt its onshore Aceh gas production this week, a company official told Dow Jones Newswires Wednesday.

The onshore gas platforms were producing up to 30,000 barrels of condensate daily before operations were suspended this week, the official said.

Indonesian state-owned oil and gas company Pertamina and ExxonMobil Oil Indonesia, a unit of Exxon Mobil Corp., are responsible for marketing the Arun condensate.

ExxonMobil Indonesia ships around two 250,000-barrel cargoes of the condensate every month to Singapore, sources said, adding that spot availability for export was limited.

The first scheduled shipment for South Korea left Arun on Monday after a one-day delay in loading. The cargo is to arrive in Pyongtaek March 19, Kogas has said.

Kogas said Monday that in the event of a supply disruption from Indonesia, it could easily adjust its delivery dates from its other long-term suppliers - Malaysia, Brunei, Oman and Qatar.

Australian LNG

The Kogas official said it is also contacting Australian LNG suppliers for possible substitute volumes for March. South Korea doesn't have a term LNG contract with Australia, but has in the past purchased on a spot basis, he added.

Indonesian officials have informed Kogas that the situation in Arun may be cleared in a few weeks, but the Kogas official said the South Korean government is concerned that the supply disruption could drag into April and May. He said Kogas is asking other LNG suppliers to ready substitute volumes for April and May as well.

Kogas has said it is scheduled to receive five loadings from Arun in April and four loadings in May, each with a volume of 56,000 tons.

"We are heading into summer season, so demand isn't so high," he said. "We are still very concerned about supply...but there is less pressure."

Indonesia is still South Korea's largest LNG supplier. South Korea is expected to import a total of 16.32 million tons of LNG in 2001, of which 5.3 million tons will come from Indonesia, or 32.5 percent.

In 1998, South Korea purchased 66.5 percent of its total LNG imports from Indonesia. The rest was imported from Malaysia and Brunei.

In a related development, Tohoku Electric Power Co. said in Tokyo on Wednesday it was seeking alternative sources of LNG.

A spokesman for the company said Tohoku was told recently by Indonesia's state oil and gas company, Pertamina, that it was unclear when operations would resume in Aceh's gas fields.

Tohoku Electric said it has an annual contract to purchase four million tonnes of LNG, of which about three million tonnes comes from Indonesia.

In addition to Indonesia, it imports LNG from Malaysia and Qatar.

Japan's only other importer of Indonesian LNG, Tokyo Electric Power Co. Inc. (TEPCO), reiterated that it was not immediately affected by events in the troubled province.

TEPCO, Japan's largest power company, imports 510,000 tons of LNG from Arun, accounting for only 3 percent of its total LNG imports.

"If the Arun problem continues for a long time, say until July when electricity demand rises, we will start considering other steps," a TEPCO spokesman said.

"But we don't think it is a crisis yet."

TEPCO has long-term contracts to buy LNG from six other suppliers, including Australia, Qatar and Malaysia.

Separately, Australia's North West Shelf liquefied natural gas project in Western Australian said it is gearing up to sell cargoes to customers left dry by the shut down of ExxonMobile Corp.'s Arun gas fields in Indonesia.

"The Australian and Indonesian LNG industries have common customers and we are working with those customers on options to maintain their supplies," a spokesman for Woodside Petroleum Ltd., operator of the North West Shelf, said.

http://www.thejakartapost.com/detailbusiness.asp? fileid=20010315.L01&irec=0

-- Martin Thompson (mthom1927@aol.com), March 14, 2001.