LNG terminals to relieve Indonesia gas shortage

June 28, 2010
The Indonesian government believes that construction of three new LNG receiving terminals in West Java, East Java, and North Sumatra is the best way of reducing the country's acute shortage of natural gas supplies.

The Indonesian government believes that construction of three new LNG receiving terminals in West Java, East Java, and North Sumatra is the best way of reducing the country's acute shortage of natural gas supplies.

"We are facing a prolonged shortage of domestic gas supplies due to the lack of infrastructure," Coordinating Economic Minister Hatta Rajasa told Indonesian legislators.

Hatta noted that domestic industries and household consumers, especially those in Java and Sumatra, are facing a prolonged shortage of gas supplies as a result of the lack of infrastructure facilities.

"In 2011, for example, we will have an oversupply of gas from Bontang, East Kalimantan. But we need LNG receiving terminals to distribute them in the country's growth centers," Hatta said.

The government prefers to promote the development of LNG storage terminals than building inter-island pipelines due to geographical difficulties, Hatta said.

Hatta said that in addition to LNG receiving terminals, Jakarta also will construct urban gas networks in several cities as well as three gas transmission networks.

Among the cities, Hatta mentioned Palembang in Sumatra, Tarakan and Bontang in Kalimantan, Sengkang in Sulawesi, as well as Surabaya, Blora, Bekasi and Depok in Java.

He said the three gas transmission networks would be constructed between Gresik and Semarang, between Semarang and Cirebon and between Kalimantan and Semarang.

According to Hatta, Indonesia's domestic industries—especially fertilizer and electricity—have seen a drastic increase in the consumption of natural gas over the past 5 years, reaching 4,233 MMscfd in 2009 from 3,541 MMscfd in 2005.

Hatta's statements coincided with reports that Indonesia may cut down its gas export to neighboring Singapore in an effort to cope with the shortage of gas in the domestic market.

"We will renegotiate the export contract with Singapore, especially on the gas volume as this is strongly related with our national interests," said Energy and Mineral Resources Minister Darwin Zahedy Saleh.

"The volume of gas exported to Singapore is about 700 MMscfd," said R. Priyono, chairman of upstream oil and gas regulator BPMigas, adding that the contract with Singapore would expire by around 2020.

Meanwhile, Indonesia's state-owned PT Pertamina said that a proposed LNG receiving terminal near Jakarta will be delayed unless a supply deal is finalized with Badak NGL, which operates the Bontang LNG terminal.

According to analyst BMI, "Any delay to the project could push back the forecast increase in gas consumption that will follow the terminal's completion, leading to a corresponding increase in the volume of LNG available for sale on the global spot market."

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