Java’s CNG demand ‘requires investment’

Gas-guzzling industries have suggested that the private sector boost investment in small and medium compressed natural gas (CNG) and liquefied natural gas (LNG) infrastructure to fulfill growing industrial gas demand on Java.

Forum for Natural Gas-usings industries (FIPGB) secretary-general Achmad Widjaya said more gas supply would help industries enhance growth and competitiveness.

He said medium-size gas storage vessels and transportation infrastructure were crucial particularly to channel gas to areas where no pipeline networks were available such as in Central Java.

“Gas can be transported by trucks, trailers, trains and vessels. There are some companies operating such services, but the amount is still far from sufficient,” he told The Jakarta Post over the weekend.

Achmad said that many small- and medium-size industries across the island were in dire need of more gas supply to maintain their competitiveness amid soaring global oil prices. He added that using oil-based fuels would cause production costs to jump significantly.

“Building pipeline networks to access those industries is very costly. It is better to add more gas transportation infrastructure such as trucks and trains to bring between 1 and 2 million standard cubic feet per day [mmscfd] of gas to a small industrial center,” he said.

“The most important thing is that the government facilitate investment in such infrastructure so more companies will enter the business.”

Indonesia is one of the world’s largest LNG producers. However, domestic gas users face an acute gas shortage.

The forum has requested that the government secure at least 796 mmscfd of gas for industries this year, while the government has said it could only provide 538 mmscfd.

Oil and gas upstream regulator BPMigas has said natural gas allocation for the domestic market in 2011 would reach 4,366 mmscfd, or 56.78 percent of Indonesia’s total gas production of 7,688 mmscfd.

Last year the government allocated 50.18 percent or 4,342 mmscfd of the total production of 8,653 mmscfd for domestic use, including for state-owned electricity firm PT PLN and industrial companies.

Most gas producers prefer to sell gas on the international market because they can get better prices.

Domestic buyers usually get the prices through business-to-business negotiations which mostly result in prices below international ones.

A lawmaker at the House of Representatives’ Commission VII overseeing energy, Satya W. Yudha, said the commission planned to set gas prices for domestic users at its economic level through the
revision of the current oil and gas law which would be deliberated
this year.

“We want gas prices set at the economic price plus profit margins set by the law. That way I believe more gas producers will be willing to sell to domestic buyers,” he told the Post.

He also urged the government to reduce gas exports to industrialized countries, saying it was better to persuade those countries to relocate their production plants to Indonesia to be closer to energy resources.

“With that model, we will get more benefits from our gas. It does not only give us revenue but also economic growth,” Satya said.