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Indonesia’s Donggi Senoro LNG may cut spot sales as prices plunge

Indonesia’s Donggi Senoro LNG is considering a cut in its spot market sales for the rest of this year due to low prices, reversing a previous decision to boost sales outside its contracted volumes, a senior official said.

The LNG exporter’s moves comes as spot LNG prices have fallen to a multi-year low on the back of new projects in Australia and the US.
The S&P Global Platts JKM for September cargoes was assessed at $4.175/MMBtu on Friday, down from $10.10/MMBtu a year earlier.

Donggi Senoro originally planned to produce 43 cargoes in 2019, of which 32 were dedicated for long-term buyers and the remaining 11 cargoes were planned for the spot market, operations director Kurniawan Rahardjo said on the sidelines of the Gas Indonesia conference in Jakarta last week.

The company has sold 6 out of the 11 uncommitted LNG cargoes on the spot market so far, but it may hold back from further spot sales if LNG prices remains low, Rahardjo said.

“We call it as a volume adjustment. We are pessimistic, looking at the LNG price that has not increased,” he said.

Donggi Senoro has a nameplate LNG production capacity of two million tons per year. This equates to around 36 LNG cargoes per year, according to its website.

It has long-term delivery commitments to three buyers–Japanese utilities Chubu Electric and Kyushu Electric, and state-owned Korea Gas Corp. If the long-term buyers do not take the cargo, then the cargo is available for the spot market.

“Our production is mostly for long-term buyers, and with good availability of natural gas we can produce around 10% above the existing capacity,” he said. “But the LNG price has been falling since January due to the flooding of LNG in the market from Australia.”

Asia’s slower economic growth has put pressure on regional LNG demand despite the current summer peak period, and increased domestic production along with domestic gas price increases have exacerbated the impact on prices, according to S&P Global Platts Analytics.

“More significant downside risks to the forecast are emerging, particularly if temperatures continue to register below normal for Northeast Asia, which would ultimately push volumes back into an LNG saturated Europe,” according to the Platts Analytics latest July report.

Donggi Senoro was the first Indonesian LNG project developed as a downstream business allowing for the separate development of upstream and downstream operations.

Rahardjo said under its upstream contract, Donggi Senoro has the right to cut its gas intake from producers by as much as 10% of the gas volume if needed.

Donggi Senoro mainly receives gas supply from the jointly owned project of Pertamina Hulu Energi and Medco E&P, with a volume of 250 million cu ft/d from the Senoro Toili gas block and 85 million cu ft/d Pertamina EP’s Matindok block, SP Global Platts reported previously.

Donggi Senoro LNG is owned by Pertamina’s subsidiary Pertamina Hulu Energi (29%), PT Medco LNG Indonesia (11.1%) and Sulawesi LNG Development Ltd (59.9%).
Source: Platts

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