T

he Indonesian government will establish guidelines on the importing of liquefied natural gas (LNG) to ensure that the country'€™s anticipated inflow of the natural resource does not hamper domestic players in the industry.

The guidelines regarding imported LNG will be included in a presidential regulation on national gas governance that is currently under preparation, the Energy and Mineral Resources Ministry'€™s program director Agus Cahyono Adi said.

'€œThe regulation will stipulate not only the permitted allocation and utilization of the gas but also other issues, such as timelines and criteria for its import,'€ Agus said on Wednesday.

Indonesia, Southeast Asia'€™s biggest economy, has long been a significant LNG supplier to the global market. The gas is sold overseas because domestic demand is still relatively low. However, the country'€™s rising energy demands amid declining crude oil production has prompted the government to call for greater utilization of gas in the domestic market to reduce dependency on petroleum products.

The ministry has estimated that the country is likely to need to start importing LNG as early as 2019.

'€œBased on our gas balance, imports will start in 2019. However, the amount will be low,'€ Agus said.

He added that the government would be open to imports for as long as the country lacked supply.

'€œHowever, we have to be careful with this imports regulation. We cannot leave our own gas undeveloped and unabsorbed because the domestic market gets filled by imported LNG,'€ he said.

Bontang LNG plant in East Kalimantan and Tangguh plant in Papua are currently the country'€™s main production centers. Late last year, Donggi Senoro LNG plant also came on stream. Most of Indonesia'€™s LNG is sold overseas under long-term contracts with international buyers.

While domestic consumers, such as state electricity firm PLN, already get an allocation of the gas, demand for gas will soon increase significantly as the government completes its ambitious electricity projects, totaling 35,000 megawatts. Moreover, the country has yet to see additional production as several big gas projects have been hampered and delayed by various issues, including disagreements within the Cabinet over the development of the gas-rich Masela block in the Arafura Sea, south of Papua.

Earlier, state-owned oil and gas giant Pertamina sealed a deal for sourcing LNG from Cheniere Energy'€™s Corpus Christi project in the US starting from 2020. The company said that the volume agreed on would be able to balance the gas deficit predicted to hit Indonesia in 2019.

Pertamina projected that Indonesia'€™s gas demands would increase by around 4.8 percent per year from 2015 to 2025, particularly due to the completion of infrastructure facilities, such as transmission and distribution pipelines as well as re-gasification terminals.

Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) vice president for gas commercialization Sampe Purba said that the regulator would continue prioritizing domestic LNG for delivery to local buyers.

'€œCurrently we have long-term contracts that must be fulfilled. Our priority is the domestic [market], which depends on the absorption capacity of domestic buyers, infrastructure and operational and commercial issues,'€ Sampe said.

He noted that as much as 80 percent of LNG delivered to domestic markets was absorbed by PLN.

PLN head of oil and gas Chairani Rachmatullah said her company had secured 10-year contracts for 34 LNG deliveries per year to feed its power plants.

PLN utilized 38 LNG shipments last year and estimates that it will absorb up to 40 this year, according to Chairani. She added that PLN was yet to plan for importing LNG.