D

o we have enough natural gas reserves? How long can our national economy rely on natural gas? Those questions reflect our concerns about the strength of our energy security. Natural gas is used for many purposes, from power generation to fuel for urban transportation. The National Energy Council has projected a huge increase in gas utilization up to the 2050s.

The international approach to quantifying remaining reserves is to calculate the reserves to production ratio (R/P) and the reserve replacement ratio (RRR). Ideally with an RRR consistently over 100 percent, a country is replacing more gas than it is producing.

Our production rate of natural gas is about 3.3 trillion cubic feet (TCF) per year, and gas discovery rate about 2.2 TCF per year. The national natural gas reserves confirm a proven reserve of 104.71 TCF '€” gas reserves that have a 90 percent probability of being produced. This gives us an R/P of 31.7 years, and RRR of 66.7 percent. Clearly, we are running out of gas.

Of course, a continuation of this trend '€” a low level of RRR '€” will inevitably result in the R/P ratio dropping in the future.

Since 2006, there has been a decline in our total gas reserves, and this is due to the paucity of new exploration activity, and as a result new natural gas reserves are not being found.

Besides a low rate of RRR, the existing gas supply to certain regions is dropping rapidly. Gas supply to Aceh, for example, used to be dominated by the discovery of the Arun gas field in 1970s, operated under a 65/35 production-sharing contract (PSC).

This giant field led to the development of LNG export facilities with six trains producing 6.8 million tons of LNG per annum (MTPA) and for the domestic market, i.e., fertilizer production and power generation in Aceh.

Today, as the remaining reserves in the field rapidly deplete, only two of the LNG trains are in operation. LNG exports are expected to cease next year and supply to the domestic market from this region will end.

A plan is to convert the existing liquefaction plant to a re-gasification unit, allowing supply to continue to the domestic market. This project will, however, take a number of years to complete.

As with Aceh, the gas balance for North Sumatra is likely to diminish very quickly. A plan is to use LNG re-gasification with a requirement for 1.5 MTPA with a gas flow rate of 200 million cubic feet per day (MMSCFD). In the absence of any other field supply option this appears to be the best alternative for this region.

Close to Aceh is Riau, and its gas balance is currently negative with all gas being exported to Singapore. There is a potential supply in the giant East Natuna gas field, but it will take years to come to fruition, as the field needs more robust technology to deal with and capture CO2.

East Kalimantan is another province that has seen a very steep decline in gas supply. This region is one of the major gas producers with the Mahakam gas field as the major source and home to one of the country'€™s biggest LNG plants for export.

The existing PSC for the Mahakam operation will expire in April 2017, and for that reason any additional investment to increment gas recovery in the existing fields, i.e., investment in new platforms and wells, is impossible.

The gas balance for Java is somewhat different than that in Sumatra and Kalimantan. A severe shortage of gas occurs in West and East Java. West Java does not have giant gas fields, and the existing supply is fulfilled from outside, i.e. piped gas from Sumatra, and from the re-gasification unit located just offshore Jakarta.

But there is good news. Development of new gas fields is underway in some regions, while a potential huge gas reserve is imminent. New gas fields are found in Aceh, with reserves of close to 700 billion cubic feet (BCF).

With improved fiscal terms in the way offshore fields are contracted, there are further potential supplies in the North Sumatra Offshore (NSO) and to the west of the NSO fields.

In East Kalimantan, when the new contract for Mahakam block is settled, there is still significant potential for additional recovery in the existing field.

In addition, a huge potential reserve in deep-water gas fields, i.e., Bangka, Gendalo and Gehem, will be developed soon by Chevron, one of the country'€™s largest PSC contractors. The total peak production from these fields is expected to exceed 1,000 MMSCFD.

The hope for self-sufficiency in gas for Java also remains. Kepodang offshore gas fields in Central Java, originally discovered in the 1980s in 230 feet of water, will be at the production stage in the next two or three years. This will secure gas supply for electricity, including 10- to 15-years'€™ supply for a 1060 MW combined-cycle power generation in Tambak Lorok.

In East Java, there was a large increase in gas supply last year, which was secured by production from another offshore gas field at Terang Sirasun Batur. The field was discovered in 1980 with the license for the production-sharing contract until 2030. Gas from this field is used for power generation and the fertilizer industry.

Another gas field, the Madura block, is also under development and is expected to be producing 100 MMSCFD next year. This development is triggered by the benefits from the proximity of the fields to the East Java Gas Pipeline and the strong East Java gas market.

Even further gas supply is expected to be available from the development of Cepu, as well as two fields, the Jambaran and Tiung Biru, that have recoverable reserves of 1.2 TCF, expected to come into production by 2019.

Overall, we will see a massive development of gas fields in the next five to 10 years, with a rate of production close to 2900 MMSCFD. Definitely, this will improve gas supply to regions with high gas demand, but may not mean an improvement in R/P and RRR.

Impediments to developing gas reserves occur here and there, leading to stagnation in the replacement of our gas reserves.

We have not fully developed a workable policy on how to deal with contract expiration. Our failure to deal with this issue has led directly to a reduction in exploration activities, a decline in gas reserve development with a resultant reduction in gas production.

Resolution of this issue should be an immediate requirement for government action.

Moreover, major companies are particularly strong in delivering complex massive gas developments. However they are weak in developing smaller incremental reserves adjacent to their major developments.

We might consider relicensing undeveloped discoveries to independent international companies as well as to local companies with sufficient technical and financial resources. As new fields are more likely to be deep-water gas fields, there seems to be a lack of use of modern technology such as subsea wells, leading to a slow development of deep-water gas reserves.

We must consider setting up a specific technical institute to support the development of this type of technology.

With all of these impediments, we are looking forward to having the Upstream Oil And Gas Regulatory Special Task Force (SKKMigas) do its job and focus on fundamental tasks to trigger exploration activities, prolong our R/P ratio and improve the replacement rate of our reserves.

When SKKMIGAS is in good hands, we should be sure that the risk of ultimate depletion of our gas reserves will become trivial and no longer a national issue.

The writer is director for energy, mineral resources and mining at the National Development Planning Board (BAPPENAS). The views expressed are his own.