Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Apr. 9 -- Indonesia has sold just three of 18 cargoes of LNG originally bound for Japan, Taiwan, and South Korea, according to oil and gas officials.
"One cargo sold to India, and two were for PT Pupuk Iskandar Muda," according to Djoko Harsono, junior deputy for financial economy and marketing at BP Migas, Indonesia's oil and gas regulatory body.
Djoko said BP Migas was trying to convert the natural gas in six other cargoes into liquefied petroleum gas (LPG) but did not elaborate on how or where the conversion would occur. He said "six or seven" of the remaining cargoes had been allocated to PT Pupuk Iskandar Muda, a domestic fertilizer producer.
Djoko said the regulatory body would offer "the remaining two" cargoes of LNG on the spot market, with Indian, Chinese, Italian, and Latin American buyers reportedly interested in buying the LNG.
In March, Japan, Taiwan, and South Korea cancelled import of the 18 cargoes of LNG because of the global economic downturn (OGJ Online, Mar. 20, 2009). The three Asian buyers said they might offer all or part of their supplies to other buyers.
PT Pertamina vice-president Hari Yulianto said the global financial crisis had resulted in falling demand for gas in the three countries and that they hoped to sell their LNG to buyers in Europe and other Asian countries.
Hari said if the three countries failed to sell the LNG, Indonesia's domestic market could have the opportunity for a larger supply of gas—a point agreed on by other officials.
At the time, BP Migas deputy chairman R. Priyono said the cargoes would be sold on the domestic market, with PT Pupuk Iskandar Muda taking as many as nine cargoes and the LPG industry taking six.
This week, Priyono announced that Indonesia's state-owned PT Pertamina has signed 12 gas sales agreements with local firms, describing them as part of government efforts to boost projects utilizing gas.
"The whole set of contracts will supply 215 MMscfd of gas for power plants, the fertilizer business, and industry," said Priyono, who expressed hope that "these business contracts will boost the government program on fossil fuel substitution."
Indonesia's effort to increase gas use coincides with the country's falling oil production and rising imports of crude and oil products, which are draining the economy of foreign exchange.
Apart from meeting the cost of rising prices, Indonesia also subsidizes domestic purchases of imported oil and products, which dramatically increases financial shortfalls for the government.
Indonesia's program of import substitution is having an effect, according to Djoko, who said domestic gas demand will rise 7-8%/year. "Demand has sharply increased in the latest 5 years," he said, adding: "We predict demand would be 4.2 bcfd in 2014."
That's an increase of 1.4 bcfd or 50% over the current rate of 2.8 bcfd, according to Djoko's figures.
Contact Eric Watkins at [email protected].