11 Aug 2011
Government Mulls Gas Export Restrictions to Fuel Local Needs
Workers being lifted by a crane to an offshore platform near Madura Island in East Java on Tuesday. The E38 West Madura Offshore block, operated by Pertamina, produces up to 14,000 barrels of oil and 120 million standard cubic feet of gas a day. (Antara Photo/Ismar Patrizki)
The government, in an effort to meet domestic demand, is studying an option to tighten rules on liquefied natural gas exports, including a requirement for foreign companies to invest in Indonesia’s gas business, a government official said.
“In future, we will only export LNG to countries that do not have their own natural resources,’’ said Evita Legowo, director general of oil and gas at the Energy Ministry on Tuesday. “Also, those [foreign] companies should invest in Indonesia,” Evita said.
Evita stopped short of elaborating on the proposal, saying that “it’s only an idea. We’ll have to frame the rules first.”
Raden Priyono, chairman of BP Migas, the upstream gas and oil regulator, also supported the ministry’s idea.
Indonesia has been struggling to meet growing demand for gas from domestic industries such as those producing ceramics and fertilizers, and has been accused of prioritizing foreign demand over local companies.
Indonesian power sector players such as state utility company Perusahaan Listrik Negara have also been complaining about gas shortages.
PLN needs approximately 1,800 million standard cubic feet per day in fuel to supply its 9,800 megawatt-capcity gas-fired power plants.
According to data from the Forum for Gas-Using Industries (FIPGB), local companies need 800 million standard cubic feet per day of gas, but the current supply meets just half of that demand.
Indonesia sold 55 percent of its gas production to overseas markets last year and the remainder to local companies.
Achmad Widjaja, chairman of FIPGB said that he was not sure about the government’s plan to restrict gas exports from Indonesia.
He said gas sales are often based on long-term contracts, which may pose difficulties for any government plan for short-term policy change.
“It is difficult to try to amend advance sales contracts with countries that buy our gas,’’ Achmad said, “unless they want to lose oil and gas investment in Indonesia.”
BP Migas has announced plans to review its gas sales contracts, including sales to Perusahaan Gas Negara, the state gas distribution agency.
Several gas producers including Total E&P Indonesie, the biggest gas producer in Indonesia, were contacted for comment but did not respond to the Jakarta Globe.
