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Indonesian LNG Output Faltering

Laksamana.net reports that Indonesia is struggling to meet its liquefied natural gas (LNG) export commitments next year and is trying to reschedule contracts or to cut cargo volumes in 2005. A third—very expensive—option would be to buy cargoes overseas to fulfill its obligations.

Indonesia is the world’s top LNG exporter, but has found it difficult to meet contractual commitments as output has declined and supplies have been diverted to the domestic market, mainly to fertiliser plants.

LNG supplies from Arun have been declining over the past decade, partly due to a shutdown prompted by separatist unrest in 2001, as well as a fire in August 2003, but mainly because of the depletion of local natural gas fields.

Arun aims to produce 109 LNG cargoes this year, down from 114 last year and well below its peak of 224 cargoes in 1994.

An analysis by the US Embassy in Jakarta estimates that 2005 production will drop to 60 cargoes of LNG, based on a continued drop in gas production from the Arun fields (operated by Exxon Mobil). That means that Arun, which only a few years ago produced some 30% of Indonesia’s LNG volume, will have seen a drop in LNG production of 73% in 12 years.

In 2003, Indonesia alone counted for 21% of the world’s exports of LNG—35.7 billion cubic meters. The second largest exporter of LNG is Malaysia, with 14% (23.4 bcm). Indonesia’s primary customers for LNG are Japan, South Korea and Taiwan.

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