Indonesia is bracing itself for an unexpected oversupply of gas amid slowing domestic demand, partly due to the government’s poor planning in arranging the country’s gas balance
ndonesia is bracing itself for an unexpected oversupply of gas amid slowing domestic demand, partly due to the government’s poor planning in arranging the country’s gas balance.
The country was projected to see a gas shortage amounting to 1,329 million standard cubic feet per day (mmscfd) last year, according to the 2016-2035 gas balance formulated by the Energy and Mineral Resources Ministry. The shortage was expected to gradually fall to 903 mmscfd of gas in 2018, before soaring once again to 1,670 mmscfd in 2019.
However, actual gas demand in 2016, including for domestic market and exports, stood at only 6,676 mmscfd of gas, far below the projected 8,072 mmscfd stated in the gas balance, according to data compiled by state-owned gas distributor PT Perusahaan Gas Negara (PGN).
As a result, PT Badak NGL, the operator of a major liquefied natural gas (LNG) plant in Bontang, East Kalimantan, has failed to find domestic buyers for 38 LNG cargoes this year, or 22.2 percent of its full-year production of 171 cargoes. The company has also estimated there will be 47 uncommitted LNG cargoes next year from a total production of around 160 to 170 cargoes.
“The actual demand is far below what has been planned by the government,” PGN head of marketing and product development Adi Munandir said recently.
“If the government fails to respond properly to this situation, there will be a prolonged oversupply of gas in the country.”
Adi said such a mismatch between supply and demand could occur because there had been no integrated roadmap on gas infrastructure development nationwide.
Previously in October, Deputy Energy and Mineral Resources Minister Arcandra Tahar said his side would soon revise Indonesia’s gas balance to align it with the current market condition, especially considering the soaring number of uncommitted LNG cargoes.
“We will improve the gas balance so that the projections can be more reliable and we can calculate carefully whether or not we need to import LNG in the future,” Arcandra said.
The Industry Ministry has projected that gas demand from industrial sector will gradually increase to 903,356.5 million British thermal units (mmbtu) in 2019 from 782,829.4 mmbtu last year by taking into account the development of a number of special economic zones (KEKs) in the country.
As of today, the government has granted KEK status to 12 areas in various regions. Nonetheless, the development of such projects has moved at a snail’s pace, partly due to land procurement problems. Subsequently, it has been difficult for investors to realize their committed investment at those KEKs.
Meanwhile, state electricity firm PLN initially estimated that Indonesia’s annual gas demand for power generation would increase to 2,805 billion British thermal units per day (bbtud) in 2026 from 1,548 bbtud in 2017, especially considering its plan to develop new gas-fueled and combined-cycle power plants worth 24.4 gigawatts (GW) in the next decade.
But the projection might no longer be relevant as the company has revealed a plan to postpone the development of several gas-fueled facilities, particularly the power plants projected to be used as peaker plants, due to slower-than-expected electricity sales. Hence, its annual gas demand will subsequently fall.
This situation occurs at a time when Indonesia has just started new production at dozens of oil and gas fields. Between January and October, 14 upstream projects were on stream with an estimated peak production rate of 21,280 barrels of oil per day (bopd) and 1,193.7 mmscfd of gas, according to the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas).
The country will also see additional gas production of 1,120 mmscfd from the Gendalo and Gehem fields in Makassar Strait once they are on stream in the 2022-2023 period. Meanwhile, the Jambaran-Tiung Biru field in East Java is slated to produce 172 mmscfd of gas by 2020.
Moreover, train 3 of the Tangguh LNG plant in West Papua is also projected to commence production with a capacity of 3.8 million tons per annum (mtpa) in 2020.
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