ccording to OGJ, Indonesia had 97.8 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2007. Indonesia is the tenth largest holder of proven natural gas reserves in the world and the single largest in the Asia-Pacific region. According to the Indonesian government, more than 70 percent of the country’s natural gas reserves are located offshore, with the largest reserves found off Natuna Island, East Kalimantan, South Sumatra, and West Papua (also known as Irian Jaya).Sector Organization
As with the oil sector, Indonesia’s natural gas sector underwent reforms with the passage of the Oil and Gas Law No. 22/2001. State-owned Pertamina was forced to relinquish its monopoly status in upstream natural gas projects, and BP Migas now holds primary regulatory authority in the sector. PT Pertamina, the limited liability corporation that was formed from its predecessor, remains an important player in Indonesia’s natural gas exploration and production activities. PT Pertamina and six major international companies dominate Indonesia’s natural gas industry, accounting for more than 90 percent of the country’s production. The six companies are: Total (estimated market share in 2004, 30 percent), ExxonMobil (17 percent), Vico (a BP-Eni joint venture, 11 percent), ConocoPhillips (11 percent), BP (6 percent), and Chevron (4 percent). Natural gas transmission and distribution activities are carried out by the state-owned utility Perusahaan Gas Negara (PGN).Exploration and Production
In 2004, Indonesia produced 2.6 Tcf of natural gas while consuming 1.3 Tcf. Also in 2004, Indonesia exported about 1.2 Tcf of liquefied natural gas (LNG) to Japan, South Korea, and Taiwan. Historically, Indonesian natural gas production has been geared toward export markets, but the country has made an effort to shift natural gas toward domestic uses in recent years as a substitute for the country’s declining oil output. However, Indonesia’s limited natural gas transmission and distribution network remains an obstacle to further domestic consumption.
Indonesia’s two major LNG production plants, Arun and Bontang, have experienced declining production in recent years. To help make up for this shortfall, Indonesia has vigorously engaged in natural gas exploration activities, as it strives to meet its long-term LNG contract obligations and also to satisfy increasing domestic demand. Several new projects are under development, the most high profile of which is the Tangguh LNG project in West Papua (see the LNG Section below for further details).Pipelines
PGN operates more than 3,100 miles of natural gas distribution and transmission lines, comprising nine regional networks. The networks have limited interconnectivity, which has restrained further growth of domestic natural gas consumption. PGN has plans to build four additional domestic natural gas pipelines to improve the country’s natural gas network connectivity, known as the Integrated Gas Transportation System (IGTS). The IGTS is designed to eventually link the islands of Sumatra, Java, and Kalimantan via a 2,600-mile pipeline. The World Bank, Asian Development Bank, and PGN are jointly financing the project. So far, the planned interconnection is partially complete, and is scheduled to be fully operational in 2010 with a capacity to transport 2.2 Bcf/d of natural gas.International Connections
Indonesia began exporting natural gas via pipeline in 2001, with the opening of the 400-mile, 325-million cubic feet per day (MMcf/d) subsea pipeline from West Natuna to Singapore. In August 2002, Indonesia began delivering 250 MMcf/d of piped natural gas to Malaysia’s Duyong platform. And in August 2003, a second natural gas connection to Singapore was opened when the South Sumatra-Singapore pipeline was completed. This line reached 350-MMcf/d maximum capacity during 2006 and will deliver natural gas to Singapore over a 20-year contract (see the Singapore Country Analysis Brief for more information).
Indonesia has played a leading role in discussions of the proposed “Trans-ASEAN Gas Pipeline” (TAGP), which envisions the establishment of a transnational pipeline network linking the major natural gas producers and consumers in Southeast Asia. The TAGP concept was initially proposed in 1997 as part of ASEAN’s “Vision 2020” initiative. In July 2002, energy ministers from the ASEAN countries signed a memorandum of understanding to study the viability of the project, although much work remains to be completed to fully realize the project’s goals (for more information, see ASEAN’s Plan of Action for Energy Cooperation, 2004-2009).Liquefied Natural Gas
|Media reports suggest that Indonesia was surpassed by Qatar in 2006 as the single largest exporter of LNG.|| |
Indonesia is a leading LNG exporter. Indonesia was the world’s largest exporter of LNG in 2005, although some reports suggest that the country was surpassed by Qatar sometime in 2006. During 2005, Indonesia exported 23 million tons (MMt, or 1,123 Bcf) of LNG, or about 16 percent of the world total.
Indonesia produces LNG from two terminals: the Bontang facility in Badak, East Kalimantan and the Arun plant in North Sumatra. The Bontang LNG terminal was Indonesia’s first to begin commercial operations, shipping its first LNG exports in 1977. The eight-train Bontang plant is the largest LNG facility in the world, with a capacity to produce 21.6 MMt/y (1.1 Tcf/y). However, production has stood below full capacity in recent years, with 2004 output estimated at 19.6 MMt (955 Bcf) of LNG. The Bontang terminal is operated by PT Badak NGL Company, 55 percent owned by PT Pertamina, 20 percent by Vico (a BP-Eni joint venture), 10 percent by Total, and 15 percent by the Japan Indonesia LNG Company (JILCO). Recently, the Bontang plant has faced underproduction for a variety of reasons, which forced the Indonesian government to divert some natural gas supplies to domestic fertilizer companies. In 2005, Bontang LNG supply contracts were renegotiated so that more of the project’s output could supply domestic customers.
The Arun LNG facility is operated by PT Arun Natural Gas Liquefaction Company, which is 55 percent owned by PT Pertamina, 30 percent by ExxonMobil, and 15 percent by JILCO. Arun is a six-train facility with a total capacity to produce more than 10 MMt/y (487 Bcf/y) of LNG, although in 2004 production stood at 6.4 MMt (312 Bcf). ExxonMobil supplies LNG for the Arun plant from its nearby Aceh fields, although the company estimates that it has depleted 90 percent of the recoverable reserves. This shortfall also contributed to the government’s effort to redirect some natural gas production designated for export to domestic users. In 2005, this forced the Indonesian government to turn to spot LNG markets to meet its contractual obligations to foreign buyers.Tangguh LNG Project
One project that holds promise for Indonesia's future in worldwide LNG markets is the BP-led Tangguh project in Papua province. The Tangguh fields contain 14.4 Tcf of proven natural gas reserves found onshore and offshore the Wiriagar and Berau blocks. The project received final approval from the government of Indonesia in March 2005, and is led by its operator BP (37.16 percent stake) and a consortium including the China National Offshore Oil Corporation (CNOOC, 16.96 percent), Mitsubishi (16.3 percent), Nippon Oil (12.23 percent), KG (10 percent), and LNG Japan (7.35 percent). The first LNG train is set to begin production in 2007, with the second due for completion by 2009. The project will initially supply 4.2 MMt/y (205 Bcf/y) of LNG, eventually reaching 8.4 MMt/y (410 Bcf/y) when both trains are producing. According to BP, the Tangguh LNG facility has already secured four long-term LNG sales contracts, including: the Fujian LNG project in China, K-Power in Korea, POSCO in Korea, and Sempra Energy in Mexico.
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