PIM may get gas supply from Blok A

Ika Krismantari, The Jakarta Post, Jakarta

After suffering from on-and-off production for almost three years due to gas supply problems, Pupuk Iskandar Muda (PIM) fertilizer plant in Nanggroe Aceh Darussalam may soon be able to secure a long-term supply from a nearby LNG gas block.

Blok A operator Medco Exploration and Production (E&P) -- a subsidiary of Medco Energi Internasional, the country's largest publicly-listed oil firm -- is currently in talks with PIM for the supply of 110 million cubic feet of gas per day starting in 2010.

"We are negotiating all the terms with PIM for the gas sales. We hope an agreement will be sealed by the end of this month," Medco E&P president director Lukman Mahfoedz told The Jakarta Post on Wednesday.

Medco is now awaiting approval from the Upstream Oil and Gas Regulatory Agency (BPMIGAS) on a proposed development plan for the block.

"The approval is very important, because it will determine our investment in the block as well as our expansion plan," Lukman said.

Medco earlier said it would spend -- jointly with block partners Premier Oil Sumatra and Japan Petroleum Exploration -- US$600 million to develop the block.

The block is owned 41.67 percent by Medco, 41.66 percent by Premier and 16.67 percent by Japex.

Lukman said the post-expansion output capacity in 2010 was expected to be 125 million cubic feet per day.

PIM would take 110 million cubic feet and the remaining 15 would be taken by state power company Perusahaan Listrik Negara (PLN), he said.

The gas supply will help PIM solve an energy crisis, dating to 2005, which has several times forced the factory to halt production.

BPMIGAS marketing division head Budi Indianto described the government's allocation of 110 million cubic feet per day of gas from the Arun gas plant in Aceh to PIM as a "mid-term solution".

The move is crucial from the fertilizer producer's perspective however, as a three-year gas supply guarantee -- until Blok A comes onstream in 2010.

PIM operates two plants --PIM 1 and PIM 2 -- each with an annual production capacity of 1,750 tons.

Both plants halted production in 2005 due to lack of gas.

In 2006, following a government gas supply injection from the Bontang plant in East Kalimantan, PIM was able to resume production for six months, after which a gas supply disruption forced another stop.

The factories resumed operation in April 2007 when gas became available.

The two plants need 110 million cubic feet of gas per day to operate at full capacity.