The Jakarta Post
Indonesia may cut down its gas export to Singapore in a bid to cope with the shortage of gas supply in the domestic market, Energy and Mineral Resources Minister Darwin Zahedy Saleh said in Jakarta on Wednesday.
The plan was unveiled following a five-hour hearing between five Cabinet ministers including Darwin, Coordinating Economic Minister Hatta Rajasa, Industry Minister M.S. Hidayat, Trade Minister Mari Elka Pangestu and State-Owned Enterprises Minister Mustafa Abubakar.
During the hearing the legislators urged the government to seek an immediate solution to cope with the gas shortage.
“We will renegotiate the export contract with Singapore, especially on the gas volume as this is strongly related with our national interests,” Darwin told reporters after the hearing.
Upstream oil and gas regulator BPMigas says Indonesia exports gas to Singapore from several fields in South Sumatra and Natuna region in Riau islands.
“The volume of gas exported to Singapore is about 700 million metric standard cubic feet per day [MMSCFD],” said BPMigas chairman R.Priyono, adding that the contract would expire by around 2020.
Priyono said the renegotiation might impact on the projects’ business calculation. “The concern is, will [the renegotiation] affect the projects’ IRR [internal rate of return],” he said.
Domestic gas consumption has been increasing significantly due to a surging demand from the industrial sector. The domestic gas consumption has increased from 3,541 MMSCFD in 2005 to 4,233 MMSCFD in 2009.
State gas distributor PT Perusahaan Gas Negara (PGN) estimated that the gas deficit would reach 385 billion British thermal units per day [BBTUD] this year and will continue to increase until reaching 713 BBTUD in 2015.
The soaring domestic gas demand has also been caused by state power firm PT PLN’s program to switch its energy consumption from oil-based fuels to gas. PLN says it now needs 1 million MMSCFD of additional gas to fire its power plants. At the Wednesday meeting, lawmakers also recommended the government revise the existing oil and gas law ordering oil and gas contractors to allocate only 25 percent of their output to the domestic market.
Vice President Boediono said recently the role of the country’s oil and gas industry had changed significantly in the last decade. “In the past, oil and gas served as the sources of the state revenue. The industry still plays this role, but it now also serves as an energy support system for the national economy,” Boediono said in the opening of the Indonesian Petroleum Association (IPA) convention and exhibition on May 18.