Risk of gas shortage haunts Indonesia

State-owned oil and gas giant Pertamina estimates that demand for liquefied natural gas (LNG) will increase by 4-5 per cent every year, mostly boosted by the power and industrial sectors.
Djohardi Angga Kusumah, Pertamina senior vice president for gas and power, said that in line with the drastic increase in demand, domestic supply would continue to drop because of ageing fields and a lack of new discoveries.
As a result, the country could begin seeing a gas shortage of 500 million standard cubic feet per day (mmscfd) in 2019. The demand will continue to climb until 2030, when it is likely to reach around 10,000mmscfd.
“Our supply is very limited and it is expected to continue dropping to around 6,000mmscfd in 2030. This means that there will be a shortage of 4,000mmscfd, or 32 tonnes of LNG,” he said.
By 2030, most of the shortage will be centred in West Java, with more than 60 per cent.
A gas shortage poses a problem, since the government has continued to emphasise the need to develop downstream sectors, including the local manufacturing industry and the power sector, to boost productivity and add value to exports.
However, at around US$9 per million British thermal units, Indonesia’s gas price is considered much higher than of its regional peers. Gas in Malaysia and Singapore hovers at around $4 per mmBtu.
Pertamina estimates that around $70 billion to $80 billion in funds is needed to develop gas infrastructure until 2030.
Djohardi said it had come to the conclusion that with poor infrastructure suspending gas prices at such a high rate, importing LNG was the answer.
Pertamina acting president director Yenni Andayani said Indonesia needed to secure long-term LNG contracts before it was too late, as global LNG demand was expected to increase significantly over the next decade.
“It may be too late for us if we wait until 2020 to start talking to suppliers,” she said.
Competition to secure contracts will be fierce among neighbouring countries, as Southeast Asia’s import demand is forecast to reach around 60 billion cubic metres of gas in 2030 from zero in 2013.
The Indonesian government has begun importing LNG for the electricity sector and is considering doing the same for other industrial sectors.
A recent decree issued by the Energy and Mineral Resources Ministry allows power producers to import LNG if the price of gas distributed by local pipes is over 11.5 per cent of the Indonesian Crude Price (ICP).
Deputy Energy and Mineral Resources Minister Arcandra Tahar said it was unlikely that the ministry would allow LNG imports this year for the industrial sectors because of a lack of supporting infrastructure and its priority towards domestic supply.
Data from the Upstream Oil and Gas Regulatory Special Task Force show that only 39 of 64 LNG cargoes allocated for the domestic market were absorbed in 2015.