WATCHING THE WORLD: Indonesian gas figures wobble

March 26, 2007
Indonesian gas is a hot topic, judging by the number of e-mails crowding my inbox these days.

Indonesian gas is a hot topic, judging by the number of e-mails crowding my inbox these days. I’m either skewered by sharp-eyed readers over dubious figures or offered contracts to advise on lucrative developments.

Let’s get something straight: As a journalist I hear lots of things that sound dubious, and many of them these days come from Indonesian officials talking about their country’s gas industry. In a word, we’re talking politics now-and economics.

Indonesia has a falling output of oil and imports crude to meet rising domestic demand. We all know what that means: When the price of crude goes up, the government has to pay more to finance the subsidy for the domestic market.

But someone has to do something and do it fast. For many Indonesians, the ministry of oil and gas represents the cavalry-always just over the horizon and ever ready to come to the rescue. And ministry officials have been more than ready to come to the rescue-at least with words.

No explanation

For example, Luluk Sumiarso, director general for oil and gas at the ministry of energy and mineral resources, said Indonesia-despite announcing a shortfall of 300 MMcfd-has sufficient reserves of gas to meet domestic needs as well as export contracts.

Reserves maybe, but Luluk did not explain how Indonesia would actually meet the projected shortfall, and such a lack of official explanation, along with wobbly figures, is driving the world nuts.

Japanese buyers, along with others in Taiwan and South Korea, are among the most exasperated, having contracted for supplies only to be told their contracts are not going to be honored. Singapore and Malaysia also have been told they cannot have any more gas after their current contracts expire.

The wobble rises

But domestic firms also have difficulty. Last week, Indonesia’s Upstream Oil and Gas Regulatory Body (BP Migas) threatened to review the special right granted to PT Bakrie & Bros. over a project to build a gas pipeline between East Kalimantan and Central Java if the company fails to start construction by July.

Yet back in January, the same government-after granting B&B the pipeline rights-cast doubts on the feasibility of the project. Vice-President Jusuf Kalla said the project might not be necessary as Java has enough gas reserves to feed itself after a large gas discovery on the Cepu Block in East Java.

Luluk and Jusuf are not alone. The official wobble goes straight to the top.

In January, President Susilo Bambang Yudhoyono told a conference on gas that, “With our new gas policy, and with the increase of new gas production resulting from new contracts, new investments, and new exploration, we can meet the dual objectives of fulfilling the rising domestic needs while supplying the export market.”

Certainly there’s gas in Indonesia-and not all of it in the ground.