Merakes' Shut-in Cuts Bontang LNG Production

Indonesia's 22.6mn t/yr Bontang LNG is expected to cut output this and next year with the shut-in of the 56.6bn m³ Merakes gas field offshore East Kalimantan, Indonesia. Argus reported, production from the field, which supplies feedstock gas to Bontang LNG, was likely halted in early October because of sanding issues. This is expected to continue until mid-2022. Specific details on the issue are unclear, but market participants suggest that sanding in gas wells results in fluctuations in gas production, pressure and flows.

The issue is expected to result in a loss of around 1-2 LNG cargoes this year and an additional 5-7 cargoes next year. It is unclear cargoes for which month will be affected by the issue. But there are expectations that the shortfall in supplies could lend support to prices, particularly if the affected loadings coincide with the peak winter demand months for which buying interest is growing on expectations of a cold winter in the northern hemisphere. Italian oil firm Eni holds a 65pc share of the Merakes project did not immediately respond to Argus' request for comment.