Skip to main content

Indonesia’s domestic demand to eat into gas imports

Hydrocarbon Engineering,


According to Business Monitor International (BMI), five gas purchase agreements signed on 27 January 2015 reflect how Indonesia’s gas production will increasingly be directed to the domestic sector, at the expense of its position as one of the world’s top five exporters of LNG. These agreements, signed with a myriad of buyers, will see gas predominantly directed to buyers from the following industries: fertiliser, power, petroleum and gas distribution.

These deals support the view of BMI that Indonesia’s net gas exports will be on the downtrend over the forecast period from 2015 to 2024. They represent only a small fraction of other deals to follow: these are expected to come particularly from the power sector, as it continues to switch away from oil, and the fertiliser industry.

BMI forecasts consumption growth to average at 4.9% over the next decade, outpacing average production growth of approximately 1.3% that is projected over the same period. As such, Indonesia’s net gas exports will fall by approximately 60.4%, from an estimate of 27.0 billion m3 in 2014 and 10.7 billion m3 by 2024. A shift to move the country’s primary mode of cooking fuel to natural gas from LPG, and the government’s success in shifting transport fuel towards gas will pose upside risk to BMI’s outlook.

Production obligations

Producers in Indonesia could also be increasingly obliged to raise their supply of gas to the domestic market. Head of acting regulator SKKMIgas Amien Sunaryadi, stated that the organisation is committed to prioritising domestic consumption over exports. At present, firms are required to reserve at least 25% of total gas production for the domestic market. However, newer projects such as Tangguh Train 3, will have to reserve 40% of total output for Indonesia. I Gusti Nyoman Wiratmadja, acting director general for oil and gas at the Energy Ministry, stated that if upstream projects are economical at domestic prices, ‘we will encourage 100% of the output for the domestic market’.

However, a higher gas reservation requirement may not be applied uniformly. Wiratmadja noted that Chevron’s Indonesia Deepwater Development (IDD) would need to target overseas buyers to take up most of its gas due to the higher cost of the project, as most domestic gas buyers require price supports. The degree of flexibility hinted by Wiratmadja is a positive sign for potential investors looking at more expensive developments.


Adapted from a BMI report by Emma McAleavey.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/11022015/indonesia-domestic-demand-224/

You might also like

 
 

Embed article link: (copy the HTML code below):