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Indonesia faces daunting challenge of bridging gas imbalance
Gas consumption is growing by approximately 4 percent annually, driven by demand from the power and industrial sectors — and will outpace supply in the next decade.
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Kebon Kelapa residents in Bogor, West Java make a long queue to buy subsidized liquefied petroleum gas (LPG) in 3-kilogram canisters on Dec. 5, 2017. (kompas.com/Ramdhan Triyadi Bempah)
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ndonesia’s plans to balance its domestic natural gas markets face huge challenges as upstream output declines and domestic consumption rises. While liquefied natural gas (LNG) can bridge the supply deficit, it requires costly import and transport infrastructure.
The country’s upstream oil and gas sector is faced with aging fields, dwindling production and falling investment. This comes amid fast rising gas demand, driven by growing consumption from the power and industrial sectors.
As a result, LNG imports are due to increase significantly, eventually turning Indonesia, one of the world’s largest and oldest LNG suppliers, into a net importer of the fuel by the mid-2030s.
But Indonesia not only needs more LNG supply to solve its gas problems. It also needs a rapid country-wide expansion of its receiving LNG infrastructure, and ensure domestic end users are able to pay premium prices for small-scale LNG deliveries.
Indonesia’s exploration and production sector has been grappling with falling investment, due to four years of sustained low oil prices, excessive bureaucracy, legal uncertainty, unattractive fiscal terms and the absence of reliable resource data.
The country’s new reserves are located in increasingly remote and more technically challenging areas such as deep water, while companies have been rolling back plans for high risk exploration amid structurally low commodity prices.
The sector’s competitiveness has been further affected by a rise in global competition, as more countries are stepping up efforts to attract capital investment amid a downturn in the sector.
