Indonesia may lose its dominance of the world's liquefied natural gas market because fields operated by producers like Chevron are running out of gas faster than expected. Chevron, based in San Ramon, California, supplies gas to the world's largest liquefaction plant, located on the Indonesian part of Borneo Island. The company told the Indonesian government last month that there was not enough gas to meet commitments to customers in Japan, South Korea and Taiwan.

Indonesian LNG sales are expected to fall 19 percent this year, according to government shipment plans. Indonesia, the world's top LNG supplier for three decades, has failed to find new supplies of gas just as prices and demand for the cleaner-burning fuel have surged to records. Buyers like Osaka Gas are seeking supplies from Qatar, for example, cutting revenue for Indonesia and hindering the government's efforts to lessen its budget deficit. "If we can't attract investment in the gas industry for new reserves, then there will be a decline as a major global supplier," Anton Gunawan, an economist for Citibank in Jakarta, said by telephone last Thursday.

"There will be a reduction in the foreign exchange reserves." Indonesia started exporting LNG in 1977. It shipped 23 million tons in 2005, more than Malaysia's 20.8 million or Qatar's 19.8 million, according to figures from BP, one of the world's largest publicly traded oil companies. Indonesia will probably fall to third place next year based on its plans to cut cargoes. LNG is natural gas that has been cooled to liquid form for transportation by ship to markets beyond the reach of pipelines. Import terminals gasify the LNG so that it can be sent through pipelines to customers like factories, power stations and households.

Utilities in Japan, Asia's largest economy, are turning to other markets for their future LNG needs. Tokyo Electric Power and Tokyo Gas, Japan's largest power and gas suppliers, have signed up for LNG from Royal Dutch Shell's Sakhalin project in Russia to diversify supplies. Osaka Gas, Japan's second-biggest gas distributor, is in talks with Inpex, a Tokyo-based oil and gas producer, about joining a $6 billion liquefied natural gas project in Australia. Japan buys 40 percent of the world's LNG and depends on Indonesia for a quarter of its LNG imports, according to the Japanese Ministry of Finance.

The gas is part of a strategy to reduce the country's reliance on Middle East oil.

"The Japanese must be pretty worried about what's happening in Indonesia," Andy Flower, a former BP executive who now works as an independent LNG consultant, said in a phone interview from Surrey, England. "There's no way they can renew the contracts and fill the pipe." Calls from politicians including Vice President Jusuf Kalla to divert Borneo gas to other parts of Indonesia have fanned concern about its reliability as a supplier.

A contract to supply 12 million metric tons a year to Japan may not be renewed when it expires in 2010 because gas production is being earmarked for delivery to Java by pipeline, Energy Minister Purnomo Yusgiantoro said in February. Buyers are "already outraged by our failure to meet commitments," Ari Soemarno, the head of the state oil company, Pertamina, which negotiates Indonesia's LNG sales contracts, said. "We're still studying the impact of Chevron's statement." While buyers are seeking alternatives, suppliers like Chevron in Indonesia have become reluctant to invest in fields that could have to supply markets in Java at lower prices than Japan, the chairman of Indonesian Petroleum Association, Christopher Newton, said in an interview in Jakarta.

All export contracts from the Borneo plant at Bontang, known as Badak NGL, are up for renewal between 2009 and 2011. Chevron acquired 7 billion cubic meters, or 247 billion cubic feet, of gas in Indonesia, or 1.2 percent of its global gas reserves, when it paid $17.8 billion for its rival U.S. producer Unocal last year, to become the world's fourth-largest publicly traded oil company.

"Unocal's reserves were a bit overstated," Kardaya Warnika, chairman of Indonesia's oil and gas regulator BPMigas, said in a phone interview in July. "I don't know whether Chevron knew about it before the takeover." Chevron informed BPMigas that reserves in a drilling area known as Makassar are insufficient to meet a supply contract to customers in Japan, a Chevron spokeswoman, Nicole Hodgson, said late last month. Under supply contracts, the regulator will seek additional gas from other producers.

"We've already reduced our reserves in the books over previous years," Hodgson said. "But the deficiency in the Makassar production sharing contract only became more apparent in recent times," she said, declining to give details. The Borneo plant is also supplied by fields operated by Total, based in Paris, and Vico Indonesia, a joint venture between BP and Eni of Italy. Chevron and Vico have both failed to meet production targets over the past two years. "Total won't be able to compensate for the loss from Chevron," said Ananda Idris, a spokesman for Total in Indonesia. Total is producing 74 million cubic meters a day, more than what it is contracted to supply, Idris said.

Vicky Aziz, Vico's vice president of human resources and services, declined to comment on Chevron's announcement. Chevron supplies 6 million cubic meters a day of gas to Bontang, Hodgson said. That is about half of the 11 million cubic meters a day that the company contracted to produce, according to BPMigas. The state oil company Pertamina has negotiated agreements with customers to reduce Bontang shipments this year to 300 cargoes, or about 16.5 million metric tons, from an original commitment of 370 cargoes, or 20.4 million tons, Soemarno said in June. "We may not be able to secure the same quantity from Indonesia after the current contracts expire," said Katsuhiko Takahashi, a spokesman for Kansai Electric, which buys 3.5 million tons a year from Pertamina.

"We will ensure the supplies from other countries such as Australia."