Exxon to Change Indonesia’s First LNG Plant Into Import Terminal

Exxon Mobil Corp. will start converting Indonesia’s oldest liquefied natural gas plant into an LNG receiving terminal to supply domestic consumers as export cargoes decline, said the country’s oil and gas regulator.

Two units at the Arun plant that store LNG meant for exports will be converted into a re-gasification unit to supply local businesses in northern Sumatra, said R. Priyono, head of BPMigas. The re-gasification unit will have a capacity of 200 million cubic feet a day, he said.

“Exxon also plans to build a pipeline to distribute the gas,” Priyono said in an interview in Jakarta today.
The two projects may cost as much as $160 million in total, he said. They will be jointly developed by Exxon and PT Pertamina and may be completed next year, according to Priyono. Maman Budiman, a spokesman at Exxon’s Indonesian unit, and Mochamad Harun, a spokesman at Pertamina, didn’t respond to two telephone calls seeking comments.

Arun, in Aceh province, shipped its first LNG cargo in 1978 and will cease exports by 2014 because of declining gas reserves. The plant currently has four LNG storage units. LNG is natural gas chilled to liquid form for transportation by ships to places not connected by pipelines.

Output from the plant in Sumatra Island may fall to 29 cargoes this year from 38 produced in 2010, as gas reserves at Arun field drop, Exxon’s Budiman said Jan. 7. Twenty-six cargoes will be sold to overseas buyers and the rest to fertilizer producer PT Pupuk Iskandar Muda, he said then.
Indonesia, the world’s third-largest LNG supplier, exports the frozen fuel from three plants to Japan, South Korea, Taiwan and China under term contracts. Bontang in East Kalimantan and Arun produced more than 95 percent of the country’s LNG in 2009, according to Bloomberg calculations based on official data.

Belawan LNG Terminal

“The proposed LNG terminal by Exxon and Pertamina will receive supply from local plants or import if necessary,” Priyono said. Among potential customers for the fuel are Pupuk Iskandar Muda and PT Pabrik Kertas Kraft Aceh, he said.

BPMigas has told PT Perusahaan Gas Negara, Indonesia’s biggest gas distributor, to review its plan to build a separate floating LNG terminal in Belawan in North Sumatra province, because costs may exceed $300 million, Priyono said.

Gas Negara said in September it plans to spend $250 million to build the Belawan LNG receiving terminal to supply northern Sumatra. Jakarta-based Gas Negara has shortlisted five companies to construct the plant, President Director Hendi Prio Santoso told reporters in Jakarta today, without giving more details.

Bloomberg Businessweek