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Local users will get more gas
The government will prioritize gas supply for domestic consumption rather than for overseas buyers in the coming years, a minister says
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The government will prioritize gas supply for domestic consumption rather than for overseas buyers in the coming years, a minister says.
Acting Coordinating Minister for the Economy Sri Mulyani Indrawati said during an international gas conference Wednesday that demand for the fuel in the country was expected to rise in line with growth in local industry and a growing middle class.
While being aware of a possible dilemma for gas companies in meeting demand for overseas buyers, Mulyani believed the government would have no other option than to prioritize the national interest.
“But I assure you that the tension (between exporting and supplying the domestic market) will not subside. It will get more tense,” she said, adding gas had been selected as a primary source of cleaner and cheaper energy to replace oil.
Hence, she urged gas producers to maintain production or even to produce more gas to meet demand for local and overseas markets.
Data from the Upstream Oil and Gas Regulator BPMigas shows that demand for gas will rise steadily at a rate of 2.8 percent annually, reaching 6 billion cubic feet per day by 2020. In 2007 demand only stood at 4.2 billion cubic feet per day.
In Java, where most industries are based, demand will increase by 4.9 percent annually, reaching 4.1 billion cubic feet per day by 2020.
This has left the government with no other option than to start thinking of allocating gas supplies to meet domestic needs since the bulk of gas production is now exported.
This policy is likely to affect overseas buyers who rely on gas supply from Indonesia, especiallyJapan and South Korea. Indonesia, the world’s third largest liquefied natural gas (LNG) exporter, is facing dwindling gas output due to depleting reserves, and lacks an extensive distribution network to help meet local demand.
The government has targeted gas production to reach 7.32 billion cubic feet per day this year, lower than last year’s production of 7.9 billion.
The share of total gas production used for domestic needs has increased significantly from 29.6 percent in 2002 to 49.5 percent in 2008, according to BPMigas.
BPMigas chairman Raden Priyono has said the government will rely on a number of big LNG projects in several places across the country to help increase total gas production in the coming years.
These include the Tangguh LNG plant in Papua, the Senoro LNG plant in Central Sulawesi as well as the development of the Masela gas block in the Timor Sea.
However, those projects are not sufficient to guarantee adequate local supply, as the present lack of a clear regulatory framework fails to ensure that gas producers will shift their production from exports to meeting domestic demand, energy analyst Pri Agung Rakhmanto said.
“We need a concrete regulation forcing supply for domestic market,” he said, adding that an article in the Oil and Gas Law requiring a domestic market obligation had not been enforced and many existing contracts did not comply with the law.
“The government should have revised those contracts,” he said.
He also suggested the government should intensify and promote the construction of downstream gas distribution infrastructure.
A consortium led by state oil and gas distributor PGN is in the process of building an LNG receiving terminal in Banten, with a total capacity of 3 million tons per year. The terminal is expected to start up operations by 2012.
Aside from infrastructure, pricing schemes should also be adjusted to make the buying price for domestic markets competitive with exports.
