The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) will take aggressive steps in selling liquefied natural gas (LNG) while at the same time reducing production or curtailment in 2020.
Deputy of Finance and Monetization of SKK Migas Arief Setiawan Handoko hopes that the reduction in gas production (curtailment) will no longer be repeated in 2020. Because, one of the impacts of the curtailment in 2019 is the production performance of ready to sell (lifting) recorded only 5,934 million cubic feet per day (MMscfd), below the state budget target of 7,000 MMscfd.
"This year we are trying to avoid curtailment and sell the products as soon as possible," he said.
Last year, global LNG price pressures caused national LNG producers to cancel some of their production to avoid losses. Throughout 2019, SKK Migas successfully marketed 229.1 LNG cargo standards spread out with details of 168.6 cargoes to the export market and 60.5 cargoes to the domestic market. The LNG supply comes from 111.7 cargo Bontang refinery and 117.4 cargo Tangguh refineries.
Meanwhile, SKK Migas targets LNG production to reach 211.9 cargo standards, namely from Tangguh Refinery 122.35 cargo standards and Bontang 89.6 cargo standards by 2020.
This LNG production target is lower and the realization of production or last year's target. Arief added that the entire planned LNG production volume had been contracted or there were no remaining cargo (uncommitted cargo).
In addition to marketing LNG, SKK Migas also encourages pipeline gas distribution in accordance with the contract. Admittedly, domestic gas distribution is increasing, but some of them are still under contract. For example, such as the use of natural gas for the industrial sector, a contract of 1,910.58 BBTud was recorded, while only those that were realized.
A total of 1,600.12 BBTud, in addition, the electricity sector with contracts 1,151.22 BBTud, while 849.44 BBtud were realized. Likewise, for the fertilizer sector, gas contracts are recorded.
A total of 830.27 BBTud, while 748 BBTud was channeled, the export of piped gas was also recorded under the contract awarded with 723.99 BBTud from the contract of 809.85 BBTud. On the other hand, SKK Migas Head Dwi Soetjipto hopes that world LNG prices continue to improve. According to him in the last tender in 2019, the prices recorded had gone up by around 11.6%, with Brent valued at the US $ 8 per MMBTU.
"Indeed, sometimes prices are very low because of the situation. So the warming of Iran - the United States has caused prices to rise, "he said.
Meanwhile, SKK Migas also prioritized the domestic market after the contract with Westem Buyer Extension (WBX) ended in 2020. Arief Setiawan Handoko said that his party would offer it to domestic buyers before marketing it overseas. According to him, the step was taken to provide added value to the domestic industry.
"Domestic only. For example, selling cheap is okay, enjoying the local industry. "Instead of being sold on the cheap spot market abroad, it's better to sell cheap in the country," he said.
At present, SKK Migas continues to look for buyers to replace WBX. This was taken after LNG buyers on Japan's west coast were not expected to renew their LNG purchase contracts from the Bontang refinery, which expires at the end of 2019.
Actually, SKK Migas has made offers to WBX since last year, but until now there has been no agreement with these buyers. The WBX is a sales contract represented by five companies on the west coast of Japan. These five companies are Chubu Electric Co., Kansai Electric Power Co., Kyushu Electric Power Co., Nippon Steel Corp., and Osaka Gas Co. Ltd.
The LNG supply is brought from the Bontang LNG Plant which is operated by Badak LNG. Difficult negotiations with the WBX occurred regarding the LNG price agreement. Arief admitted that not all WBX members would agree to extend their contracts with Indonesia.
"When we will start renegotiating again after getting the price reference from the sale at the end of 2019," he added.
On the other hand, Wood Mackenzie, a global energy consultant, said market liberalization and low spot LNG prices had given birth to new players.
Principal Analyst WoodMac Asti Asra said lower spot LNG prices have made buyers look for ways to get cheaper access.
According to him, in 2020, many companies will directly seek LNG directly to the spot market with short and medium-term agreements. On the other hand, gas demand growth in China has slowed by around 9% in 2019 compared to the previous year of 17%. The trade war is said to have a domino effect on the Chinese economy.
Woodmac Senior Manager Miaoni Huang said that with the power of the Siberian pipeline operating and having the first gas flowing from Russia to northern China, the need for winter LNG could be cut.
"In addition, domestic gas production is still increasing at a faster pace than in previous years. If this continues in 2020, gas imports will face slower growth. "
Bisnis Indonesia, Page-20, Tuesday, Jan 14, 2020
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