Japan seeks Donggi Senoro LNG as Indonesia limits exports

Japanese government officials confirmed their country’s continued interest in receiving LNG from Indonesia’s Donggi Senoro project.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Dec. 4 -- Japanese government officials confirmed their country’s continued interest in receiving LNG from Indonesia’s Donggi Senoro project.

“The project is very much important for both sides and, yes, (we still hope the gas will be supplied to Japan),” said Takayuki Ueda, Japan's director general for natural resources and energy.

The Donggi Senoro LNG plant project, intended to process gas from the Senoro and Matindok fields in central Sulawesi, is owned by Mitsubishi Corp. (51%), PT Pertamina (29%), and PT Medco Energi Internasional (20%).

The project has been stalled due to a decision by the Indonesian government requiring all of the feedstock gas be allocated for the domestic market and not for international markets.

That message was further underscored when Mustafa Abubakar, minister of state-owned enterprises, recently said Jakarta wants to evaluate gas purchase contracts that are nearing expiry to ensure the availability of supply for the local market.

“The gas companies have been told to prioritize domestic demand first before deciding to extend their contracts with foreign companies,” said Mustafa. “We will evaluate gas contracts from certain local gas companies that are soon to expire so we can prioritize domestic demand.”

Japan and South Korea are the main export markets for Indonesian gas, but they are competing with a substantial rise in domestic demand from state-owned electricity monopoly PT PLN, state gas distributor PT PGN, and local industry, especially companies producing fertilizer and ceramics.

“Due to the electricity crisis and the continued growth of the economy, the domestic demand for gas is predicted to increase further,” said Mustafa, referring to the regular rotating blackouts in many parts of the country.

PLN needs 1.6 bscfd of gas, while available supply is only 900 MMscfd. The firm said it will need 2.233 bscfd of gas next year, while supply may only reach 1.258 bscfd.

The government set targets for total gas production to reach 7.32 bscfd this year, down from 7.9 bscfd in 2008.

Fertilizer shortages have arisen due to lack of gas supplies, and fertilizer producers claim to be operating below installed capacity due to gas shortages.

According to Mustafa, state fertilizer firm PT Pupuk Kaltim could not resume production due to a shortage of gas, while other major fertilizer producers such as PT Aceh ASEAN Fertilizer, PT Pupuk Iskandar Muda, and PT Pupuk Sriwijaya often had to reduce production.

Contact Eric Watkins at hippalus@yahoo.com.

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