T

he floating storage and regasification unit (FSRU) in Lampung, which is run by a subsidiary of state company PT Perusahaan Gas Negara (PGN), will operate far below its capacity next year due to steep declines in gas demand in the area.

The facility has a capacity of up to 14 cargoes of liquefied natural gas (LNG) a year but it will only store around four to five cargoes next year, according to PGN director Muhammad Wahid Sutopo.

'€œWe are still expecting an increase in demand [next year] compared to this year. However, we need to look at the demand profile and the LNG price,'€ Wahid said on Wednesday.

PGN owns the Lampung FSRU through its subsidiary PT PGN LNG Indonesia. Earlier this year, the operation of the facility was disrupted because of zero demand as potential buyers were affected by the country'€™s slowing economic growth.

Weakening demand from state-owned electricity company PLN, which is the biggest consumer of domestic gas, was one of key contributors for the halt in the operation of the Lampung facility.

PLN cut gas demand due to slowing growth of power sales this year as its clients reduced consumption in response to weakening economic growth. Moreover, the electricity company has switched to energy sources that are cheaper than LNG.

In October, the FSRU facility received one cargo of LNG, 138,000 cubic meters in volume, shipped from the Tangguh LNG plant in Papua. Under the government'€™s allocation program, the facility should have received 14 cargoes from Tangguh this year.

Industry players have criticized the high price of LNG. Meanwhile, gas distribution companies said the high price had been affected by numerous factors, including transportation fee because the LNG was transported from a place as far away as Papua to Java and Sumatra.

There is also a cost in toll fees and the regasification process before the product is finally delivered to customers.

Wahid said PGN and PLN had yet to reach a deal on the gas price to be delivered to the electricity firm'€™s power plants.

'€œPLN is a prospective consumer and it has a dynamic profile in accordance to power demand. We are working with PLN but we have no deadline,'€ Wahid said.

Therefore, Wahid continued, PGN could connect and blend supply from Lampung FSRU to its existing distribution facilities so that it would be able to absorb up to 5 cargoes from Tangguh next year and deliver them to other clients.

PLN confirmed that no significant progress had been reported from negotiations with PGN to solve the gas price issue.

'€œThere is no update in this. We predict better demand next year so that we can absorb more gas. However, the demand will remain low,'€ PLN fuel and gas division head Chairani Rachmatullah said.