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nergy and Mineral Resources Minister Darwin Zahedy Saleh said Monday that the government would not increase liquefied natural gas (LNG) exports in a bid to increase supply for domestic gas users.

He explained that the government planned to increase the portion of natural gas in state electricity company PT PLN’s energy mix so that the company could be more competitive compared to when it had to burn
expensive oil-based fuels.

“The other priority is to secure gas supply for fertilizer-makers in the country,” Darwin revealed in a text message.

To achieve the goals, the government has set up a team to evaluate and renegotiate all LNG selling contracts, he said. The team will report the results of its study to President Susilo Bambang Yudhoyono, he added.

“For contracts that require the government to pay compensation or a penalty if the content is changed, the government will consider the cost and benefit for the country. We will prioritize national interests in making decisions,” said Darwin.

Nearly half of the total gas produced in the country last year was exported, mostly in the form of LNG produced at the country’s three LNG plants: the Arun LNG plant in Aceh, the Bontang LNG plant in East Kalimantan and the Tangguh LNG plant in Papua.

Indonesia is the world’s third-largest LNG producer, exporting most of its gas to Japan, South Korea and Taiwan.

According to upstream oil and gas regulator BPMigas, this year, Indonesia will export 362 shipments of LNG this year, a decrease from 427 shipments last year. Japan is the largest LNG importer from Indonesia with 172 shipments in 2011, also falling from 258 shipments in 2010.

Some gas contracts use prices below the market prices, including the LNG sales contract to Fujian, China, from the Tangguh LNG plant in Papua with a total volume of 2.6 million tons per annum (mtpa).

The government signed a contract to deliver LNG to China’s Fujian province in 2002 for US$2.4 per million British thermal units (mmbtu), regardless of any increases in crude oil prices. In 2006, the price was revised to $3.4 per mmbtu, which critics said was still too low.

In addition to LNG contracts, the government also aims to renegotiate gas sent to Singapore through a pipeline from the Grissik field in South Sumatra and the B block in Jambi operated by US-based ConocoPhillips.

The company produces around 1,000 million standard cubic feet per day (mmscfd) of gas. About 300 mmscfd is delivered to Singapore.

BPMigas spokesperson Gde Pradnyana said that the government was currently in discussions with Singapore so that PLN could get more gas in the future.

“Singapore has agreed that the gas that was previously allocated to PLN should be returned to the electricity company. We will do that through a swap mechanism. The details will be discussed later,” he explained.

In 2010, the government decided to reduce the gas supply to the Muara Tawar power plant in West Java from 200 mmscfd to 100 mmscfd due to declining gas supply from ConocoPhillips to state gas distributor PT PGN.

In January 2010, the US company channeled 378 billion British thermal units per day (bbtud) to PGN, which then decreased to 328 bbtud in February and 295 bbtud in March.

The government then decided to use the gas supply from ConocoPhillips for PT Chevron Pacific Indonesia to support national oil production.