A

plant located in Arun, Aceh, is set for a new role as a regasification terminal for liquefied natural gas (LNG) after a recent cargo from the Tangguh facility in Papua was delivered for the first time and will be redirected to generate electricity.

The LNG cargo, which has 119,000 cubic meters in volume, was sent from the Tangguh LNG facility and reached Arun on Thursday. The LNG will be processed by the Arun LNG receiving and regasification terminal, which recently completed development.

The Arun regasification plant is a development of existing facilities operated by PT Arun NGL, which is no longer able to run its activities optimally as the gas source for LNG production has been depleted.

A project to modify Arun NGL'€™s assets to the receiving and regasification facility started in early 2014. The Arun facility is now operated by PT Perta Arun Gas, a subsidiary of PT Pertamina Gas, which is also a subsidiary of oil and gas giant PT Pertamina.

Under the current mechanism, regasified gas from the Arun plant will be delivered through Pertagas'€™ pipeline.

'€œAccording to the initial plan, the LNG supply will be for [state-owned electricity firm PT] PLN and nearby industry. Delivery will be performed through the Arun-Belawan pipeline owned by Pertagas,'€ Perta Arun Gas president director Teuku Khaidir said.

PLN has been allocated to receive nine cargoes of LNG from the Tangguh facility in Papua this year.

'€œThis additional gas for electricity generation will reinforce electricity supply in the northern part of Sumatra. This will also significantly increase PLN'€™s efficiency by replacing the oil fuel used in Belawan'€™s generator,'€ PLN president director Sofyan Basir said.

The northern part of Sumatra is currently facing an electricity deficit and PLN is struggling to maintain power supply there.

The Upstream Oil and Gas Regulatory Special Task Force'€™s (SKKMigas) chief, Amien Sunaryadi, expected the first delivery of LNG from Tangguh to Arun to help the government meet its target of seeing higher absorption of the country'€™s natural gas by domestic users.

'€œThis is a real effort from the upstream oil and gas sector to prioritize domestic energy needs. SKKMigas is committed to increasing gas supply allocation for the domestic market,'€ Amien said.

SKKMigas is targeting to see as much as 61 percent of total production from gas fields in the country to be absorbed by domestic buyers.

Indonesia is estimated to have significant amounts of gas reserves. However, poor infrastructure facilities connecting areas rich in gas supply in the eastern part of the country and demand-rich areas in the western part have hindered domestic consumption. Instead, the gas in LNG cargoes is sent abroad, making the country a major LNG exporter for years.

As oil production continues to decline, the government is calling for the utilization of natural gas and is requesting that gas-field contractors be committed to domestic deliveries.

Tangguh, which is operated by BP Berau, is currently undertaking expansion plans to develop the Train 3, which will increase LNG production. The operator has committed that 40 percent of the Train 3 output will be delivered to domestic buyers.

'€œThis [the first delivery to Arun] is an important milestone for Tangguh in its commitment to supply domestic gas to help meet the increasing demand in Indonesia. The Tangguh partnership is proud to support the commissioning of the Arun regasification facility and looks forward to safely delivering future cargoes to the terminal,'€ Christina Verchere, BP Asia-Pacific regional president, said in a statement.

Following the commercial operation of the Arun plant and the Arun-Belawan pipeline, Pertagas is currently planning to accelerate the development of a 120-kilometer pipeline that will deliver gas supply for industries in the Kawasan Industri Medan and Kawasan Ekonomi Khusus Sei Mengkei areas starting in June this year.