Arun LNG to Ship Final Cargo

Indonesia's Arun liquefied natural gas (LNG) project in Aceh in northern Sumatra has stopped producing the super-cooled fuel as it switches to being a receiving and regasification terminal, an official from the plant said on Tuesday.

Indonesia is still one of the world's biggest LNG exporters, but with domestic production slipping the country of 240 million has been forced to turn to foreign supplies to keep up with natural gas demand that is growing around 10 percent a year.

The country's LNG exports have fallen by 40 percent since 1999 when it supplied one-third of global consumption, according to the U.S. Energy Information Administration. In 2006, the Southeast Asian country was overtaken by Qatar as the world's largest LNG exporter.

The Arun plant - majority owned by Pertamina, with ExxonMobil and the Japan Indonesia LNG Company also holding stakes - had been operating since 1977.

At peak output, Arun had a total of six trains, but due to declining gas supply, only one of those has been operating in recent years, Teuku Khaidir, president director of Perta Arun Gas, a subsidiary of state energy company Pertamina told an industry conference in Jakarta.

"Four days ago the Arun LNG production switched off and tomorrow is the last cargo to (South) Korea," Khaidir said.

The Arun gas hub conversion is estimated to cost more than $80 million and includes a 3-million-tonne-per-year regasification unit and alterations to its 600,000-cubic-metre LNG storage facility.

Arun will become Indonesia's first land-based receiving and regasification terminal and is expected to take its first LNG shipments from BP's Tangguh project in eastern Indonesia next year.

Arun will also become the main receiving terminal for Indonesia's first gas imports, which are expected to begin arriving in 2018.

"The LNG hub will become a storage facility to support national energy security and also international trading," Khaidir said.

The gas hub has two tanks that are dedicated for use by third parties in an open-access system, he said.

The 340-kilometer Arun-Belawan pipeline will take gas from the Arun receiving hub to supply industry and power plants in North Sumatra. Once this and other gas pipelines are complete, Indonesia's gas demand may increase.

Reporting by Fergus Jensen