A Kalla Group subsidiary, Bumi Sarana Migas, will be responsible for constructing the terminal, which will have a capacity of 500 million standard cubic feet per day (mmscfd), equal to 4 million tons of LNG, it announced on Monday.

“The western part of Java will experience a gas deficit caused by the depletion of gas reserves in Sumatra, whereas gas demand will increase,” the corporation wrote in a press statement, citing its rationale for the investment, which was based on a forecast from energy think tank Wood Mackenzie.

The company has had a suitable plot of land on the foreshore where the water has an adequate depth for the necessary vessels. A nearby island will act as a barrier to protect big LNG carriers, such as the Q-Flex and Q-Max series, from the waves, said Bumi Sarana Migas spokesperson Nanda Sinaga.

The Kalla Group has appointed an engineering consultant from Japan to design the LNG receiving terminal. Last year, the group also made an agreement with a partner from Japan, which “has a vast experience in operating LNG terminals and in gas distribution”.

Funding for the Rp 10 trillion infrastructure project will come from shareholders, as well as through loans from Japanese government financial institutions and Japanese banks, according to the Kalla Group, which did not elaborate.

The Kalla Group began exploring the possibility of developing an LNG terminal in 2013 with technical help from its Japanese counterpart. They found that Banjarnegara was “very ideal” to be developed as a land-based LNG regasification terminal, it wrote in the statement.

Southeast Asian countries, including Indonesia, are expected to become net gas importers by 2030, as demand is predicted to increase to more than 200 billion cubic meters (bcm) of natural gas and local supplies would not be able to meet it, resulting in the need to import about 60 bcm, according to data from Pertamina.

By then, Indonesia’s deficit is expected to be 4.07 mmscfd. The highest demand for gas will come from Java and Sumatra because of the growth of industries in those regions. Java is predicted to have a deficit of 1.56 mmscfd by then and Sumatra of 3.87 mmscfd.

Most of the demand currently comes from state-owned electricity company Perusahaan Listrik Negara (PLN), but other non-PLN demands are also expected to rise by 7 percent per year from 2015 to 2025. The demand is driven primarily by fertilizer, refinery and mining industries, most of which are located in eastern Indonesia.

On the other hand, Southeast Asia is expected to develop regasification infrastructure with a capacity of almost 75 million tons per annum (mtpa) by 2030 and it will possibly lead to a race among neighboring countries over who can get the cheapest gas import contracts.

“We have to be more aggressive, especially seeing the developments in Thailand, Vietnam and even in the Philippines. We have to be ready to face some competition,” Pertamina director for gas and renewable energy Yenni Andayani said.

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