INDONESIA'S LNG, LPG EARNINGS TO TOP THOSE FROM OIL

Indonesia expects exports of liquefied natural gas and liquefied petroleum gases to surpass oil exports as the biggest source of its foreign exchange in the 1990s.

As Indonesia's crude oil reserves dwindle, foreign demand for its LNG is expected to accelerate. The nation is stepping up the search for gas to expand its share of world LNG exports. Indonesia currently is the world's largest exporter of LNG, accounting for almost 40% of the market, said the Ministry of Mines and Energy.

According to Bank Indonesia, although LNG accounted for less than one third of petroleum export revenues in fiscal 1988-89, almost half the petroleum sector's overall contribution to net foreign exchange earnings came from LNG (see table). The government forecasts that relationship to stay the same in fiscal 1989-90.

"However, with additional LNG sales being negotiated and facilities being expanded, LNG export earnings may surpass those of oil on a net basis next fiscal year, and in gross export revenues within 5 years," the bank said.

LNG GROWTH

Indonesia is completing construction of another LNG train at Bontang that will boost the country's LNG export capacity to 21.3 million tons/year from 19 million tons/year.

Bontang, in East Kalimantan, has an LNG export capacity of 9.8 millon tons/year. Indonesia's other major gas field, Arun in North Sumatra, has an LNG export capacity of 9.2 million tons/year.

Most of Indonesia's gas production is exported as LNG to Asia-16.5 million tons/year to Japan and 2 million tons/year to South Korea. Those exports earned Indonesia $2.9 billion in 1989, equal to about half the value it received for its crude oil exports.

This year, new contracts with Japan, Taiwan, and Singapore will hike Indonesian LNG exports to almost 22 million tons.

Japan will boost its purchases of Indonesian LNG by 700,000 tons in 1990 from last year's level. Taiwan signed contracts covering imports of 1.5 million tons of Indonesian LNG in 1990. And Singapore recently began final negotiations for purchase of 980,000 tons/year of LNG from Indonesia.

Japan, the world's biggest importer of LNG, is expected to boost its imports of LNG by as much as 50% by 2000. More than half of Japan's LNG comes from Indonesia.

DOMESTIC USE GROWTH

Indonesia also will continue increasing its use of indigenous gas.

Total domestic use of Indonesian gas is expected to jump to 1.7 bcfd by 2000 from the current 850 MMcfd.

Notable in that scenario are the country's efforts to develop a domestic petrochemical industry to trim surging imports. A group of Indonesian banks, along with the Bank of Japan, has agreed to fund construction of a $200 million plant at Cilegon, West Java, to produce 200,000 metric tons/year of polypropylene. That will help back out imports costing about $800 million/year.

More Indonesian exploration is targeted toward gas, notably near Natuna Island in the South China Sea, where about half of Indonesia's 90 tcf of gas reserves lies.

During 1982-88, Indonesian gas production climbed to almost 5 bcfd from about 3 bcfd.

LPG EXPORTS TO GROW

In 1988, Indonesia positioned itself to become a major exporter of LPG with start-up of new Arun and Bontang fractionators at a cost of more than $800 million.

The two plants, with a combined capacity of 2.25 million metric tons/year, will provide 1.95 million tons/year to Japan under a 10 year contract.

Indonesian LPG production jumped by 61% to 1.25 million tons in 1988. During first half 1989, Indonesian LPG exports totaled 1.24 million tons. With the first full year of expanded production, LPG exports could reach 2.7 million tons.

Before the Arun and Bontang LPG plants were completed, Indonesian LPG output was limited to four LPG recovery units in oil fields with associated gas and four LPG recovery units at refineries operated by state oil company Pertamina.

To upgrade the refinery LPG for export, Pertamina and a group of Japanese companies installed a $68 million, 450,000 ton/year fractionator in 1986 at Tanjung Uban, Bintan Island. The Tanjung Uban unit is operating below capacity because of limited refinery LPG feedstock.

Indonesia has more LPG capacity under construction and plans further capacity additions. Its LPG production capacity is expected to increase to 3 million tons/year in the early 1990s, according to government projections.

Indonesia's government also is pressing a campaign for increased domestic consumption of LPG to back out kerosine use. Domestic consumption of LPG has increased fivefold in the past 10 years.

A World Bank study estimates that by 2000 LPG will replace 20% of Indonesia's kerosine demand, currently about 123,000 b/d. Government estimates peg domestic LPG demand at 350,000 tons in fiscal 1990 and 464,00 tons in fiscal 1993.