The Indonesian government must pay more attention to the development of gas as the main source of energy of the future, to fulfill the country'€™s growing energy needs.

The 38th Indonesian Petroleum Association'€™s (IPA) convention and exhibition last week once again reminded Indonesia that gas was the main source of energy to fulfill its growing needs. Its oil reserves and production are depleting, while its gas reserves remain abundant.

IPA chairman Lukman Mahfoedz said Indonesian hydrocarbon reserves consisted of 85 percent gas and only 15 percent oil. '€œAnd of the total gas potential, about 75 percent is located in deep water in the eastern part of Indonesia,'€ he said during a discussion at the IPA convention.

According to him, oil production continued to decrease while consumption continued to increase in the last decade. The increase was driven by a growing population and economic growth that averaged at about 6 percent in the last few years.

Indonesia'€™s oil need stands at around 1.26 million barrels per day (bpd), but only half can be fulfilled through local refineries owned by state-owned oil company PT Pertamina. The rest must be imported from various suppliers abroad.

He said that in 2025, when the Indonesian population was projected to be around 300 million, the gap between what it produced and what it consumed would amount to 2 million bpd. The total need of
Indonesia at that time could reach 7.7 million barrels of oil equivalent per day (boepd).

'€œIf the current trend persists, we'€™ll see our consumption of oil triple in 2025. That means our oil imports will also increase,'€ he said, suggesting an increase in oil imports was not good for Indonesia'€™s energy resilience.

Pertamina president director Karen Agustiawan said if the Indonesian government failed to diversify its energy sources away from oil, then Indonesia would see its import of oil increase to 1.7 million barrels.

She said imports would drain Indonesia'€™s state funds and could weaken its energy security as it had yet to rely on foreign countries, particularly those in the Middle East, which had long been known for its political volatility.

Therefore, she said, Indonesia should prepare for the dominant role of gas in its future energy mix. Now, gas stands as the third largest contributor to Indonesian energy after oil and coal, but in the future the role of gas will be dominant. '€œSo, our future is gas,'€ she said.

Based on data from the Energy and Mineral Resources Ministry, Indonesian oil reserves are now estimated at about 3.7 billion barrels, while gas reserves are at around 150.39 trillion cubic feet (tcf). The country'€™s gas potential has not yet been fully explored, particularly in eastern Indonesia.

In addition, Indonesia has big non-conventional gas potential, such as coal-bed methane (CBM) and shale gas. Indonesia is included in the world'€™s top 10 in terms of unconventional gas potential. It has between 10 and 20 percent of the world'€™s total reserves. Reserves of shale gas alone are estimated to be 574 tcf, and CBM at 453 tcf.

Edy Hermantoro, director general of oil and gas, said the interests of investors in developing unconventional hydrocarbon were increasing in Indonesia and their production was expected to increase in the next few years.

During the IPA convention, the government made a direct offer for three unconventional projects in Sumatra. Two blocks, Jambi 1 Deep and Jambi 2 Deep, were awarded to Pertamina, and the other three blocks in South Sumatra and Kalimantan were offered through a regular tender.

Considering these facts, the Indonesian government must pay more attention to gas development as a future main source of energy.

Oil and gas players participating in the IPA convention have called on the government to improve its legal basis, infrastructure and other facilities necessary for gas development and for a successful oil to gas conversion policy.

'€œThe declining trend in oil means we must conserve our energy use and continue converting the use of oil into gas,'€ Karen said on the sidelines of the convention.

On the legal basis, ConocoPhillips Indonesia president director Eric S. Isaacson said Indonesia should improve the legal basis for gas exploration and development as the sector had changed.

'€œThe time of easy, cheap gas is over. Now, most gas reserves are located in deep water and frontiers that are difficult to explore and develop,'€ he said.

He added that cheap gas had all been contracted to foreign buyers. Only a small portion can be later allocated to domestic buyers when the relevant contracts expire. When gas projects expire, their remaining production will only be small, like the one in Arun Block, Aceh.

Gas reserves remain abundant in Indonesia, but they need a higher level of technological capability, human resources and more capital, while the risks are much higher than those in previous projects in western Indonesia.

The Indonesian government must improve its gas infrastructure to facilitate its distribution from production areas to consumption areas that are mostly on the islands of Java and Sumatra.

Indonesia has poor gas infrastructure, causing many gas supplies to be exported to foreign buyers, while local consumers cannot get access, even though their demands are rising. Indonesia also faces regulation problems, such as the open access policy for all existing gas pipelines, which are now mostly controlled by state-owned gas distributor PT PGN.

Karen expressed her hope that the Indonesian government would be consistent with its gas conversion policy by continuing the development of local gas infrastructure and other necessary retailing facilities, such as gas refueling stations.

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