RI to Focus on Gas Potential with New Projects this Year

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With demand for gas likely to soar in the coming years in line with rapid industrial and energy-use expansion, the government has poured most of its resources this year into developing several key upstream and downstream gas projects.

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The strategy is part of the Energy and Mineral Resources Ministry’s 2013 strategic plan in which projects related to gas will dominate the country’s energy sector until 2018.

According to a copy of the strategic plan, received by The Jakarta Post recently, the ministry will prioritize three gas projects this year, developed separately by France-based Total E&P Indonesie, ConocoPhillips Indonesia and Australia-based Pearl Oil.

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Total’s project will involve the enhanced development of the South Mahakam field in East Kalimantan, expected to generate 202 million standard cubic feet per day (mmscfd). The gas will be delivered to the nearby Bontang liquefied natural gas (LNG) plant.

The government’s interim upstream oil and gas regulator (SKMigas) will soon open the bidding process for the buyer of the gas from Bontang.

Another key development is by Pearl Oil, which is expected to pump 50 mmscfd of gas from its Ruby field in Sebuku Island in East Kalimantan. This gas will be supplied to a fertilizer plant run by state-owned PT Pupuk Kalimantan Timur (PKT) in East Kalimantan.

Conoco is slated to contribute 40 million mmscfd from the Sumpal field in South Sumatra. Output from the field will be delivered to Gas Supply Pte Ltd. (GSPL) Singapore as part of the firm’s supply contract.

“We’re expecting these new projects to be ready this year, and will soon contribute to higher production,” said SKMigas spokesman Hadi Prasetyo on Monday.

Gas supply for the domestic market is estimated to grow by 9 percent this year to 4,020 billion British thermal units per day (BBTUD) from 3,615 billion BBTUD, according to the ministry.

The ministry has also revealed that in the past eight years, domestic supply of gas has soared by 250 percent, mostly due to demand from power plants, manufacturing industry and fertilizers plants.

The exponential growth in demand for gas from the domestic market has pushed the government to secure national interest by rebalancing exports and domestic sales. Indonesia is the world’s third largest gas exporter after Qatar and Malaysia.

Gas exports this year are slated to decline by as much as 3,870 BBTUD. For the first time, allocation for exports will be smaller than for domestic use.

But as the single largest holder of proven natural gas reserves in the Asia Pacific region, Indonesia’s gas plays an important role for the Japanese, Chinese and Korean energy supply.

With reserves of 112 trillion cubic feet (TCF), Indonesia has expanded its gas pipeline network to neighboring countries such as Singapore and Malaysia.

As the 14th largest holder of proven natural gas reserves in the world, Indonesia is now struggling to expand the capacity of its downstream sector to help supply sufficient gas to the domestic market.

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According to the ministry’s strategic planning, the government has relied on several projects already under construction for next year’s operations.

The network will link the gas pipeline network from the western part of Sumatra to the eastern part of Java.

Among the projects is the revitalization of the Arun LNG plant in Aceh, which is scheduled for completion in the fourth quarter of next year and the construction of a pipeline that will link Arun to Belawan Port, which will be completed in the fourth quarter of next year.

All of the projects are managed by state oil and gas company PT Pertamina.

State gas-utility company PT Perusahaan Gas Negara (PGN) will focus this year on completing the floating storage regasification unit (FSRU) in Lampung, which is scheduled for completion in 2014.

The FSRU is currently under construction by Norway-based Hoegh, an LNG transportation and services company.

The Pertamina and PGN joint venture, PT Nusantara Regas, is slated to complete its FSRU in West Java this year. The unit will need 26 LNG cargoes or around 22 million tons in 2013.

Pertamina’s unit PT Pertagas is also in the construction process of pipelines that will link industrial areas of Cirebon and Bekasi in West Java. The project is set for completion in 2014. The company is also constructing a pipeline that will link Gresik in East Java with Central Java’s capital Semarang.

PT Rekayasa Industri is also in the pipeline business with Pertamina, constructing a pipeline that will link Cirebon and Semarang.

Other key projects include the construction of an FSRU in Central Java by Pertamina, which is set for completion in 2014, and the construction of a pipeline from the Kepodang gas field to the Tambaklorok power plant in Central Java, scheduled for completion in 2014.

Energy sector think tank ReforMiner Institute’s deputy director Komaidi Notonegoro said that given the country’s declining oil output, the government should aggressively focus on gas development, which is expected to supersede oil in the near future.

Indonesia is currently a net importer of both crude oil and refined products. Crude oil production has been declining since 1998 due to the maturation of the country’s largest oil fields and the failure to develop new, comparable resources.

“The government is already on the right track by concentrating on the gas projects rather than oil. The most important thing is their consistency in implementing the plans,” said Komaidi. (Amahl S. Azwar; The Jakarta Post)

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