While committed to exporting gas to Japan, the government will also have to prioritize gas supply for the domestic market, Vice President Jusuf Kalla says.
"I have spoken to the Japan Bank for International Cooperation (JBIC) that we will help Japan (to meet their gas demand) as long as (the transactions) are under a win-win solution," Kalla said late Sunday, addressing a meeting with Indonesian citizens in Tokyo.
"We need gas for domestic consumption, but we also need to export gas for foreign exchange reserves. " he said.
He did not elaborate on Indonesia's plans to export gas to Japan. The country exported 13,906.8 MMBTU of gas to Japan in 2007.
Recently, the government urged gas producers to at least maintain production or even to produce more gas to meet rising demand for combined local and overseas markets.
The government has targeted gas production to reach 7.32 billion cubic feet per day this year, somewhat lower than the 7.9 billion cubic feet per day reached in 2008.
Domestic demand for gas in was expected to rise in the coming years along with growth in the size of the middle class and in local industries.
Acting Coordinating Minister for the Economy Sri Mulyani Indrawati said earlier that, in terms of gas supply, the government put higher priority on domestic consumption rather than overseas exports, while being aware of a possible conflict for gas companies in meeting demand for overseas markets.
Analysts have even suggested a domestic supply obligation to help balance domestic and export needs.
This planned policy would affect overseas buyers who rely on gas supplies from Indonesia, especially Japan and South Korea.
To try to ensure LNG supplies Japan recently extended gas supply contracts for two years from the ConocoPhillips' field in Alaska, after Indonesia slashed planned shipments because of domestic demand.
Japan is the world's biggest LNG market, while Indonesia supplies a fifth of the country's demand for gas.
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.
Kalla hinted that Japan, via JBIC, would increase funding to Indonesia if it could secure gas supplies.
"It is better for Japan to put its money into Indonesia (than to invest it domestically), he said.
"Domestically, Japan will receive interest of only 0.1 percent, while it will get a 3 percent return from lending money to us," he said.
Last week, JBIC president Hiroshi Watanabe held a meeting behind closed doors with Kalla.
Kalla said that with its large population and increasingly large economy, Indonesia remained attractive to Japanese investors.
"We have abundant natural resources. Japan is dependent on us, particularly on energy," he said.
Regarding Japan's plans to provide US$17 billion in economic stimulus for Asia, Kalla said he expected Indonesia would benefit.
"Of course we expect that. We will discuss that," he said Monday after receiving his doctor honoris causa from Soka University.
This year, the Vice President said Indonesia's economy would grow by 5 percent, less than the estimated 6.2 percent in 2008, due to the global financial crisis and downturn.
However, Kalla remains optimistic the economy will expand to 7 percent annually as soon as the crisis is over.
He believed that if the economy then expanded to 7 percent per year during the next five years, then Indonesia would be in a position to compete in economic terms with Thailand and Malaysia.
"We have made significant changes in the past four years: Strengthening the domestic market, reducing inessential imports, converting kerosene usage to LPG. These moves have helped to make our economy stronger," he said.
Kalla also said Indonesia should focus on protecting the real sector, instead of the financial sector.
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