The government expects output from new gas projects to be fully absorbed by domestic buyers as the country is striving to boost gas consumption to reduce dependency on traditional fuels.

Indonesia is estimated to have a significant amount of gas resources, but it exports a lot of the liquefied natural gas (LNG) it produces because of better selling prices and the certainty of overseas buyers.

Gas producers are legally required to reserve at least 25 percent of their output for the domestic market and domestic buyers are encouraged to absorb all of the gas produced here at market price, which is also beneficial for the producers, said the acting director general for oil and gas at the Energy and Mineral Resources Ministry, I Gusti Nyoman Wiratmadja.

'€œIf the POD [plan of development] economical [calculation] allows gas absorption by domestic buyers, we will encourage 100 percent of the output for the domestic market,'€ Wiratmadja said on the sidelines of the seventh International Indonesia Gas Conference & Exhibition on Tuesday.

Domestic gas buyers are dominated by those in government priority industries that need price support, making it more profitable to sell gas overseas. Moreover, many domestic gas buyers are forced to delay or cancel their consumption plans because of delays in their projects.

Last year, 54 percent of gas production was absorbed by the domestic market, and the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) is expecting to boost the figure to 61 percent this year, covering distribution via pipelines and in LNG and supported by new floating storage and re-gasification facilities.

This year, the country is expecting to see the production of 258 cargoes of LNG, 200 of which are expected to be sold overseas, according to SKKMigas.

'€œThe remaining 58 cargoes are expected to be absorbed by domestic buyers, rising from 31 cargoes delivered last year,'€ SKKMigas spokesman Rudianto Rimbono said.

To ensure the higher deliveries, five gas purchase agreements were signed on Tuesday, which will amount to a total income of US$617 million for state coffers, SKKMigas chief Amien Sunaryadi said.

For production projects such as the Indonesia Deepwater Development (IDD) by Chevron, the government is expecting domestic gas allocation to be above 25 percent but it will need to consider overseas buyers to absorb most of the gas, which will likely sell at a higher price because of the cost of the project, Wiratmadja said.

The government is currently waiting for the POD revision of the IDD project that may take up at least $12 billion in investment.

Other deepwater gas projects, such as the Masela block development, have committed to delivering at least 25 percent of their output to domestic buyers, according to Wiratmadja.

Higher domestic allocation can be seen in the development of the Tangguh Train 3 project, which delivers 40 percent of its output to the domestic market.

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