Poor Infrastructure May Lead to Idle Gas Supply

Indonesia’s abundant gas supply should have been a blessing as it copes with fast surging energy demand spurred by robust economic growth.

Domestic gas consumption rose by 12.6 percent to 3,997 million standard cubic feet per day (mmscfd) in 2016 from 2012, in contrast to dwindling exports, according to data from the Energy and Mineral Resources Ministry.

However, the sheer supply may turn into a curse as lack of infrastructure to support gas distribution means some of it remains untouched. The ministry’s oil and gas director-general IGN Wiratmaja Puja revealed Wednesday that there were still 16 to 18 uncommitted cargoes of liquefied natural gas (LNG) for this year’s delivery as no buyer has shown interest.

The oversupply also stretched over a longer period of time as shown by the existence of 50 to 60 uncommitted cargoes per year for 2018-2035 delivery, most of which came from the LNG Bontang refinery in East Kalimantan, he added.

MAP OF GAS INFRASTUCTURE IN INDONESIA

“We have a huge supply So, this calls for a strategy to manage the utilization of LNG,” Wiratmaja said during the 2017 Gas Indonesia Summit & Exhibition (GIS) at the Jakarta Convention Center (JCC).

“We hope more LNG can be deployed for domestic use to develop the eastern and central parts of Indonesia. However, the challenge lies in [the lack of] gas infrastructure.”

To address the issue, the government has planned to offer a tender for the development of virtual pipelines in four clusters that will connect regions Without gas infrastructure.

MAP OF LNG REFINERY IN INDONESIA

The lirst cluster covers Papua and West Papua, with a total demand of around 427 mmscfd of gas. The second comprises Maluku, North Maluku, North Sulawesi and Central Sulawesi with an overall demand of 290 mmscfd. Meanwhile, the third cluster includes East Nusa Tenggara (NTT), West Nusa Tenggara (NTB) and South Sulawesi that will need 284 mmscfd of gas, whereas the fourth cluster comprises the Natuna region and West Kalimantan, requiring 50 mmscfd.

In order to distribute the gas more efliciently, the government also plans to apply a milk run system or a round-trip logistics mechanism in the eastern part of the archipelago.

“Some studies show that the milk run system can be applied in several islands to supply LNG for electricity,” Wiratmaja went on. State-owned gas distributor PT Perusahaan Gas Negara’s (PGN) commerce director Danny Praditya also acknowledged that infrastructure was the main stumbling block to ensuring sufficient gas supplies across the country. 

In response, he called on the government to involve all stakeholders in the formulation of a short-term and mid-term integrated roadmap on gas infrastructure development nation wide, along with detailed data on gas demand and supply in various regions.

“Besides the gas volume, we strongly recommend the government to include [in the roadmap] the development costs of each infrastructure, the economic price of gas and the types of facilities in each region,” Danny said.

“That way, we will have a more accurate picture of infrastructure development, which will lead to more efficient implementation.” 

Elia Massa Manik, president director of state-owned oil and gas firm Pertamina, agreed with Danny saying that the construction of gas facilities should also take into account the amount of gas demand in each region, and consequently the availability of an integrated roadmap was a must.

Fitch Group’s BMI Research estimates that Indonesia’s gas demand will surge at an average annual rate of 4 percent over the next decade, primarily pushed by the power generation sector. The government will need 1,100 mmscfd of gas to generate 13,432 megawatts (MW) of electricity to feed 35,000 MW power plants as planned.

However, gas supplies are set to fall due to natural declines at a number of mature gas fields and delays of several major projects. “This will see Indonesia become a net LNG importer by 2022. Pertamina has a deal with the United States’ Corpus Christie project starting in 2018 and an agreement with the UAE’s [United Arab Emirates] Emirates National Oil Company to directly purchase LNG from the latter based on need,” BMI Research wrote in its research note.

Jakarta Post, Page-13, Thursday, July 13, 2017