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2020, Gas Marketing will be More Aggressive

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) said it would be more proactive in marketing national gas, both to the domestic and foreign markets.

Referring to the data of SKK Migas, lifting or gas distribution last year was recorded at 5,934 million cubic feet per day / mmscfd, below the target set in the 7,000 mmscd state budget. One of the causes of low gas lifting is the reduction in gas production following the cancellation of liquid / LNG natural gas supply by the buyer.

In 2020, Deputy Finance and Monetization of SKK Migas Arief S Handoko, his party does not want the gas production reduction or curtailment to happen again. For this reason, he will be more proactive in marketing domestic LNG production.

"Try to avoid curtail and try to sell as soon as possible," he said.

However, it will not necessarily sell LNG production to the spot market. He said he would still aim for a mid-term LNG purchase contract to obtain a very good price. This is to ensure that state revenues from LNG sales remain high. Therefore, the export market is not the only target of SKK Migas.

"If it cannot be sold abroad, it is offered to domestic partners, such as PT PGN Tbk and PT PLN (Persero)," explained Arief.

So far, all planned LNG production volumes have been contracted, aka no remaining cargo (uncommitted cargo). However, the projected amount of LNG production still has the potential to rise so that the possibility of uncommitted cargo in 2020 is still present.

This follows the plan of PT Pertamina (Persero) to boost gas production in the Mahakam Block. This oil and gas block is a supplier of the Bontang LNG Plant. Because when making the annual LNG delivery plan (annual delivery program), it does not accommodate the increased production from the Mahakam Block.

the Mahakam Block

"What is uncommitted is that there are about five cargoes because Mahakam has more production and has not entered the plan, because they [Pertamina] are also not confident," explained Arief.

In 2020, the company targets LNG production to reach 211.9 cargo standards, namely from Tangguh Refinery 122.3 cargo standards and Bontang 89.6 cargo standards. This production target is lower than last year which reached 252 cargo standards, of which Tangguh Refinery 120 cargo standards and 132 Bontang cargo standards.

Unfortunately, due to the fall in LNG prices on the spot market that pushed buyers to cancel cargo orders, the purchase of LNG in 2019 did not reach the target. As of December, LNG purchases were recorded at only 229.1 cargo standards, with details from the 117.4 Tangguh cargo standard and 111.4 cargo standard Bontang.

This LNG distribution did not reach the target either for domestic or export. In 2019, the target for LNG distribution into the country is 67 cargo standards and 185 cargo exports. While the distribution realization for the domestic market is only 60.5 cargo standards and 168.6 cargo exports. 

    Not only LNG, Arief added, his party would also strive for pipeline gas distribution according to the contract. The reason is, although domestic gas distribution is increasing, some of them are still under contract.

"If there is an allocation but a little absorption, it will be relocated to another buyer," he said.

Western Buyer

According to Arief, he also must find a buyer to replace the Western Buyer Extension (WBX). This is because the LNG buyer on Japan's west coast will probably not renew his LNG purchase contract from the Bontang refinery, which expires at the end of 2020. 

     He explained that negotiations with the WBX had been going on since 2019 and had not yet reached an agreement. Because the contract expires in late 2020, it will also look for other buyers.

"We are looking for a replacement for WBX if it is not renewed. WBX does not want to extend, but we are trying to find other buyers, "he said.

However, in 2020, he will still open negotiations with the WBX. Although he admitted, not all WBX members would agree to extend their contracts with Indonesia. Negotiations carried out last year were stopped because of the LNG price problem.

"We are still trying to be extended. Although not all members of the consortium will extend the contract. At this time, we will start renegotiating after getting the price reference from the sale at the end of 2019 yesterday, "explained Arif.

One option is that LNG, which is usually sold to WBX, can be sold to domestic buyers even at low prices. This is considered far better than selling the LNG to the international spot market at a low price.

For information, this LNG sales contract to Japan is with five companies on Japan's west coast or commonly called Western Buyers. This LNG supply is brought from the Bontang LNG Plant which is operated by Badak LNG. These five companies are Chubu Electric Co., Kansai Electric Power Co, Kyushu Electric Power Co, Nippon Steel Corp dan Osaka Gas Co Ltd

Investor Daily, Page-9, Tuesday, Jan 14, 2020

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