T

he government may no longer extend existing liquefied natural gas (LNG) contracts in the future in order to be able to meet the surge in domestic demand, Industry Minister M.S. Hidayat said in Jakarta on Wednesday.

“It has been agreed [within the government] that the national interest is number one,” the minister said  on the sideline of  an Industry Ministry coordination meeting at the Sahid Hotel.

“So, [we] will stop [extending] international contracts that have expired and will allocate [the gas] to the domestic market. The surplus can be exported,” he added.

The country’s industrial sector has been hard hit by the acute shortage of natural gas. Indonesia is one of the world’s largest gas producers but most of its gas is exported in the form of LNG to Japan, Taiwan, South Korea, China and several other countries under long-term contracts which could be valid for between 20 and 25 years.

Energy and Mineral Resources Minister Darwin Zahedy Saleh said recently that a number of LNG export contracts would end within the next few years. However, the government has no plans yet to terminate the contracts, he added.

One manufacturer after another has been forced to shut down because of gas shortages.

Gas is largely used by manufacturers of ceramics, float glass, textiles and chemical products such as rubber gloves as well as steel-based products, base metal and cement.

According to Indonesian Ceramics Industry Association (Asaki) data, these industries are only able to get between 20 and 40 percent of their gas needs.

Hidayat said the production of the country’s three LNG plants – the Arun LNG plant in Aceh, the Badak LNG plant in East Kalimantan and the Tangguh LNG plant in Papua would in future be used to supply the domestic market.  

He said that for this purpose, a number of LNG receiving terminals are to be built in Java and North Sumatra to distribute LNG from the three plants to the domestic market.

The terminals would be located in North Sumatra, West Java and East Java.

Besides the manufacturing sector, gas shortages also hurt the power sector. State power firm PT PLN’s primary energy director Nur Pamudji previously said PLN was short of gas, up to as much as 235 million British thermal units per day (BTUD) in Jakarta, 150 million BTUD in Central Java, and 90 million BTUD in East Java.

Outside Java, the big shortage is in North Sumatra, where PLN needs about 150 million BTUD of gas.

PLN is working to convert its fuel-fired power plants to gas-fired power plants in a bid to cut the cost of the government fuel subsidy.