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Closed gas fields put Exxon under pressure

The unprecedented shutdown of Exxon Mobil's gas fields in Aceh shows no sign of ending in the near future despite a massive security operation in the rebellious Sumatran province.

The prolonged closure adds yet another problem to the welter of economic difficulties facing President Abdurrahman Wahid's embattled government, including a sagging exchange rate, ballooning budget deficit, stifling interest rates and slowing growth.

An Exxon Mobil Indonesia spokesman said yesterday that the United States oil and gas giant's local unit was assessing the situation daily, hoping for 'an early and safe resumption'.

Exxon's stance on what it calls a 'temporary shutdown' has been unchanged since the valves were turned off and full-time staff pulled out in early March as the security situation deteriorated.

However, industry insiders in Jakarta said the longer the fields were non-operational, the greater the complexity and cost Exxon Mobil would face when its staff did go in to restart work.

For the government, the closure not only adds to the country's already poor image with international investors, but could drive long-term customers away from gas contracts.

Head of the Indonesian Petroleum Association, Bill Fanagan, told a business audience recently that with competition for liquified natural gas (LNG) on the rise, the country could ill-afford the Aceh disruption.

'The exceptional reputation that Indonesia has built over the last 25 or more years as the pre-eminent supplier of LNG to the world, has been tarnished,' Mr Fanagan told the audience.

Aceh, a staunchly Islamic province in Sumatra's far north, is home to one of Indonesia's longest-running insurgencies. Although separatist rebels from the Free Aceh Movement, known as GAM, have long targeted foreign businesses, their activities failed to make much of an impact - until now.

This year's apparent escalation of GAM activities and subsequent Exxon Mobil shutdown prompted the government to agree to a vastly increased military role.

Exxon Mobil is Indonesia's second-largest producer of LNG, with total output of 1.6 billion cubic feet a day. Its main Aceh customers - Korea Gas and Japan's Tohoku Electric Power - have been forced to seek alternative supplies.

The protracted dispute has also drawn in the direct involvement of the US ambassador in Jakarta, Robert Gelbard. He recently visited Aceh and reportedly met with GAM commanders.

While not confirming that a face-to-face meeting took place, the Exxon Mobil official did say that US diplomatic staff had been supportive of the group's bid to resume production.

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