Natural gas has been growing in demand in the past several years with the growing use of gas as source industrial and household energy, as well as feedstock for fertilizer industry.
Gas is the country's third main source of energy after oil fuel (BBM) and coal. Gas accounted for 13.7% of the country's energy consumption in 2008. Shortage in the supply of natural gas in the country has affected the operations of a number of industries notably fertilizer industry.
The gas price, which is not dictated by the market mechanism for domestic consumption has led to producers seeking to export most or all of their production resulting in scarcity in supply on the domestic market. The price of gas on the domestic market has always been cheaper than in export market.
The government sought to sort out the problem with the Domestic Market Obligation (DMO) policy and slapped restriction on gas exports from new gas field such as Donggi - Senoro to better guarantee supply on the domestic market.
The government has issued a number of policies to accommodate strong demand from industrialists to use as much as possible gas for domestic consumption. Among the policies include the change in the point of gas delivery from the plant gate in Singapore to the well heads in Indonesia, a move seen that could change the process of gas cost calculation and selling price.
Natural Gas Composition
Natural gas is made up of hydrocarbon gases, primarily methane (C1). It is usually found deep underground, often with deposits of oil, and is pumped out together with oil.
After it reaches the surface, the gas is separated from any oil or water that may have been mixed in the oil deposit. It is then processed to remove impurities, other gases such as propane and butane, and any remaining water or water vapor.
Natural gas differs from LPG (Liquefied Petroleum Gas / LPG) in its component, with LPG primarily made up of Propane (C3). LPG is distributed by vessel, while natural gas by pipeline.
Energy generated from natural gas is measured in calorie. The energy content is not the same among gas from different wells. The lowest calorie of natural gas in Indonesia is 5991 Kcal /m3 and the highest is 11127 Kcal /m3.
Natural gas distributed in Banten, Karawang, Bogor and Jakarta has a calorie of 7703 - 11127 Kcal /m3, and natural gas distributed in Cirebon has the lowest calorie of 5991 Kcal /m3.
Natural gas reserves to be depleted in 59 years. Indonesia's potential gas reserves recorded in 2008 totaled 170 TSCF with production rate per year of 2.87 TSCF. Based on the production to reserve ratio, Indonesia's gas reserves will last for 59 years from 2008. The reserves could shrink or increase depending on new discovery. The latest major discoveries were in Tangguh, Papua and Masela, in southern Maluku. There was almost none new gas drilling in the past three years. In 2007 drilling reached 22,626 feet.
Producing gas fields in Indonesia
Donggi - Senoro
The Donggi-Senoro gas fields in Central Sulawesi are operated by PT Pertamina EP and JOB Pertamina-Medco E&P Tomori. Development of the Donggi field is integrated in the area of Matindok, which includes the Donggi field, the Matindok field, the Maleoraja field and the Minahaki field. The Senoro field is the expansion of the Senoro gas field and the Tiaka oil field.
Proven reserves in the Matindok and Senoro blocks totals 2.3 trillion cubic feet (Tcf). Gas production from the Donggi Senoro fields could increase by 50 million metric standard cubic feet per day (MMSCFD) with the discovery of new reserves.
In the Senoro field there is potential addition of 0.6 TCF in reserve and in Matindok 0.76 TCF. The two fields, therefore, could turn out 455 mmscfd per day for 15 years. Investment needed for the development of the Senoro field is estimated to reach US$ 800 million and investment in Matindok at US$ 790 million.
The government has announced that gas from the two fields are all for domestic consumption, but the government may have to change the decision to attract investors development of the fields has been delayed long over disagreement on the government policy? The investors want that they are allowed to export part of the production. The consortium has proposed a scheme under which 70 MMSCFD of the production was for domestic consumption and 335 MMSCFD for exports. They considered the scheme most feasible.
Gas from the fields is expected to be used by PT Pupuk Sriwijaya (Pusri), PT Perusahaan Listrik Negara (PLN) and PT Panca Amara Utama (PAU). The three needs a total gas supply of 211 million MSCFD.
Gas production tends to be stable
The country's gas production in the past several years has relatively been stable or unchanged with production rate averaging 2.9 TSCF (trillion standard cubic feet). The producers include Pertamina, holders of Pertamina Joint Operation Body (JOB), Pertamina Technical Assistance Contract (TAC) and Pertamina Joint Operation Body - Production Sharing Contract (JOB-PSC), and production sharing contract (PSC). PSC contractors accounted for the largest part of the gas production contributing 2.5 TSCF, followed by Pertamina contributing 300 MSCF.
Production by holders of Pertamina JOB contracts and Pertamina TAC were small accounting for 18 million MSCF and 30 MSCF respectively in 2006 to 2008.
Utilization of natural gas
Natural gas is used by fertilizer industry, LPG industry, (liquefied natural gas (LNG) industry, condensate industry, gas drilling, etc.
Most or an average of 1.3 TSCF of the country's natural gas production is processed into LNG for exports with only 320 million MSCF for domestic consumption every years.