Staying true to its pledge to prioritize domestic demand, the government is seeking to evaluate gas purchase contracts that are nearing expiry to ensure the availability of supply for the local market, a minister says.
The evaluation is to make sure that once their current contracts end, gas producers meet domestic gas demand first before resuming exports, State SOE Minister Mustafa Abubakar told reporters Friday.
“The gas companies have been told to prioritize domestic demand first before deciding to extend their contracts with foreign companies,” said Mustafa.
“We will evaluate gas contracts from certain local gas companies that are soon to expire so we can prioritize domestic demand,” he said.
Indonesia is listed as the world’s third-largest liquefied natural gas (LNG) exporter.
Japan and South Korea are the main export markets for Indonesian gas.
However, the country is now facing a significant rise in domestic demand for gas, including from state electricity monopoly PT PLN, state gas distributor PT PGN, and industry – notably fertilizer and ceramics companies.
Now that PLN is struggling to deal with an ongoing electricity crisis, which has resulted in regular, rotating blackouts in many parts of the country, including the capital, Mustafa said, PLN would need even more gas supply as an alternative fuel to oil and coal to fire its power plants.
“Due to the electricity crisis and the continued growth of the economy, the domestic demand for gas is predicted to increase further,” Mustafa said.
At present, due to its monopoly, PLN needs about 1,600 million standard cubic feet per day (mmscfd), while the available supply is limited to only 900 mmscfd. It estimates that it will need 2,233 mmscfd gas next year, while the available supply may only reach 1,258 mmscfd.
The government has set targets for total gas production to reach 7,320 mmscfd this year, slightly lower than the 7,900 mmscfd reached in 2008.
Fertilizer producers have also identified their inability to secure adequate gas supplies as the main cause of fertilizer shortages. They claim that due to the gas supply shortages, they have been operating at below their installed production capacity.
Mustafa cited the example of a factory owned by state fertilizer producer PT Pupuk Kaltim that could not resume production due to a shortage of gas.
Other major fertilizer producers such as PT Aceh ASEAN Fertilizer, PT Pupuk Iskandar Muda and PT Pupuk Sriwijaya have often had to resort to reducing production capacity due to a lack of gas supply.
Currently, Pertamina EP, a subsidiary of state gas and oil company PT Pertamina, is the biggest gas supplier for the domestic market, producing about 1,057 mmscfd.