Natural gas in Indonesia 2010 - February 2010 page1

INDONESIAN COMMERCIAL NEWSLETTER

February 2010

DEVELOPMENT OF NATURAL GAS INDUSTRY IN INDONESIA

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Total E&P Indonesie largest producer

Total E&P Indonesie, a PSC holder, is he largest producer of natural gas in Indonesia. The company produces gas from offshore field in East Kalimantan. In 2008, its production reached 1,009,972,142 MMSCF.

Total E&P Indonesie contribute around 40% to the country's total production of natural gas. Other major producers among PSC holders include Exxon Mobil, Conoco Phillips Grissik Ltd, Vico Indonesia and Petrochina Jabung Ltd.

Exports of natural gas on the decline

Indonesia exports most of its natural gas production with a smaller part left for domestic consumption. Exports have been made to Singapore, Japan, China, Korea, Thailand and Malaysia. Exports are mainly in the form of LNG, but there are also through transmission pipeline.

Domestic consumption of natural gas in the 2003-2007 period totaled 20,120,000 MMSCFD or 48 percent of the total production and exports totaled 21,550,000 MMSCFD or 52 percent of the total production.

Since 2009, the export percentage began to decline. In 2009 exports were less than 50 percent of the production only 46.08 percent or 3,667 MMSCFD.

An export of natural gas in LNG has tended to decline from year to year but exports through pipelines tended to increase. In 2007, the country's total exports of LNG fell 8.5 percent to 1,076,785 MMSCFD. In 2008, the exports fell further by 0.8 percent to 1,067,796 MMSCFD.

In the first 10 months of 2009, the country's LNG exports totaled only 841,911 MMSCFD or around 84,191 MMSCFD per month or lower than the average of 88,983 MMSCFD per months in the previous year.

Meanwhile, exports through pipelines were growing such as through the pipeline transporting gas from Grissik in central Sumatra to Singapore.

Volume of gas exports through pipelines has fluctuated in the past years but tended to rise. In 2007, exports through pipelines reached 297,000 MMSCFD, but fell 20 percent to 235,000 MMSCFD in 2008. In 2009, exports shot up reaching 291,000 MMSCFD in the first 10 months of hat year.

In he coming years gas exports are expected to shrink with growing domestic requirement.

Exports contracts

Gas export contracts are generally long term. The country still has a number of long term contracts to honor and some of the contracts are effective only as from this year.

A long term 18-year contract for gas exports to Singapore between Premier Oil Natuna BV and Sembgas of Singapore signed in 2008 will be effective only as from this year. Gas is to be exported through submarine pipelines owned by Conoco Philips.

New export contracts in 2009 included one for 125,000 tons per year from the Tangguh field in Papua signed between Pertamina and a Japanese buyer Tohoku Electric Power Co.

Gas from Tangguh is exported in the form of LNG processed in the Tangguh LNG plant. The plant has a production capacity of 7.6 million tons of LNG a year. Around 7.4 million tons of LNG to be produced by the plant has been sold under contracts to a number of buyers. The contract buyers include Sempra Energy Marketing Co for 3.7 million tons per year, Fujian 2.6 million tons per year, and Korean buyers Posco and K-Power 1.1 million tons per year.

Meanwhile, a number of old contract will expire this year in 2010 such as one signed with Japanese western buyers.

According to plan, in 2011, the government will reduce new contracts for gas exports to guarantee domestic requirement.

Domestic gas requirement growing

The country needs natural gas for various purposes such as feedstock for fertilizer industry and as fuel for ceramic, and textile industries and as household fuel, and to feed gas fired power plants and as a source of energy in oil and gas mines.

Domestic gas requirement averages 5,557.6 MMSCFD in 2009 and 2010. Central and southern parts of Sumatra and western Java (Region III) are the largest consumers of gas with consumption averaging 2,994.7 MMSCFD in 2009-2014.

Gas as fuel is used by PGN of Batam, PGN of Pekanbaru, and PGN of West Java and LPG plants such as those of PT Ogspiras Basya Pratama in Palembang and PT. Titis Sampurna in Prabumulih. Industrial consumers using gas as fuel include PT. Asahimas in West Java.

Gas used to generate power is used by various power generating plants such as PLTG of Duri, PLTG of Teluk Lembu, PLTGU of Asrigita Prasarana, PLTG of Talang Dukuh, PLTG of Energi Musi Makmur, PLN of Injiniring, PLN of Kramasan, PLN of Borang, PLN of Muara Karang, PLN of Tanjung Priok, PLN of Muara Tawar, and PLN of Cilegon.

PT. Chevron Pacific Indonesia uses most of its gas production to generate energy for own and local requirement and for Joint Operation Body (JOB) of Suryaraya Teladan.

Gas feedstock is used by fertilizer factories such as those of PT Pupuk Sriwijaya in Palembang, and PT Pupuk Kujang in West Java.

The second largest consumer of natural gas is the eastern part of Java (Region V) with consumption averaging 843.8 MMSCFD mainly for combined cycle power plant (PLTGU) of Gresik owned by PLN . Petrochemical company PT Petrokimia Gresik also needs natural gas as feedstock. PGN, the state gas distributor by gas mainly to be sold as fuel for industries and household.

Indonesia is one of the world's largest producer of natural gas but its domestic requirement is not yet entirely secured as the country has long term contracts to exports a large part of its gas output. The government, however, has pledged to reduce exports to guarantee domestic supply.

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