Indonesia's Arun gas field likely to shut in 2016: oil minister

Indonesia's Arun gas field likely to shut in 2016: oil minister

Singapore (Platts)--12May2005


Indonesia's Arun natural gas field in Aceh province of North Sumatra will
likely shut down for good in 2016, having depleted all its reserves, oil
minister Purnomo Yusgiantoro said Thursday. Closure of the ExxonMobil-operated
field, which accounts for over 60% of the average 578,000 cu ft/day of gas
currently being supplied to the Arun LNG plant, is widely expected to result
in the shutdown of the liquefaction facilities too. The Arun LNG plant, which
became operational in 1977 with 12.3-mil mt/year capacity over six
liquefaction trains, currently has four trains operational, but is effectively
using only half its capacity. It exports cargoes to Japan, South Korea and
Taiwan under term contracts, the last of which will end in 2014/15, sources at
the joint-venture operator, Arun NGL, said earlier. Arun LNG is scheduled to
ship 75 LNG cargoes this year, down from 109 exported in 2004, according to
the source.

However, the mothballing of Arun will not seriously dent Indonesia's LNG
production capability, because of the start-up of the BP-led Tangguh LNG
project in West Papua (formerly Irian Jaya), Purnomo told the "LNG Supplies
for Asian Markets 2005" conference in Singapore Thursday. Tangguh is being
planned as a 7.5-mil mt/year project with two trains initially, with the first
drop of LNG expected in 2008. Meanwhile, Indonesia's LNG capacity at the
eight-train, 22.3-mil mt/year Bontang plant will remain steady. The $5.48-bil
Tangguh project is based on 14.4 Tcf of proven reserves, Purnomo said, but had
potential for expansion, given the 18.4 Tcf of proven and probable or 2P
reserves and 23.6 Tcf of proven, probable and possible or 3P reserves in the
three fields supporting the plant. The currently planned 7.5-mil mt/year
capacity would need only 11 Tcf of gas reserves, he said.

The Tangguh LNG output is being marketed in China's Fujian province, South
Korea and the US West Coast, with all 7.5-mil mt/year of initial capacity
already tied up in contracts with these buyers. Any additional production
could be sold domestically, into the high-consumption island of Java, or
exported to Japan, Purnomo added. Separately, Indonesia also remains in
discussions with the Philippines for 1.5-mil mt/year of term LNG supplies, the
minister said. "Discussions have been slow, but we will get there," he said,
without providing additional details. It made economical sense, because the
Bontang plant in East Kalimantan is close to the Philippines, Purnomo added.
The Philippines does not import any LNG at present.

This story was first published in Platts real-time news and market reporting
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