Micro LNG vs Mine-Mouth power plant for gas to power in Indonesia

Amrullah Hakim's picture
Amrullah Hakim, Field Operation and Project Development Manager, JOB Pertamina - Medco E&P Simenggaris
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Indonesia has 5 large islands and still has problems with the population dispersal and its electrification ratio. This condition is not in balance with the gas production site, which is often far from the population and far from business activities. A good example for this case is North Kalimantan of Indonesia; this province is far from the capital of Indonesia and far from the central industrial area on the island of Borneo itself. However, the province is adjacent to Sabah, the territory of Malaysia.

In this province, there is Joint Operating Body (“JOB”) between Pertamina, Indonesia’s state-owned oil company, and Medco E&P Simenggaris (jointly referred to as “JOB Simenggaris”) started operating the Simenggaris Block located in South Sembakung field, North Kalimantan in 2013. JOB Simenggaris recently conducted exploratory drilling activities to find oil. Nevertheless, the result indicated that more gas is available instead. The gas potential from the Simenggaris block may be more than 30 mmcfd.

There are a few commercial strategies for monetizing gas reserves in this company, such as:

  • Building a gas-fired power plant within the gas plant area (mine mouth) and transferring it through power transmission line to other Borneo island within the country
  • Exporting electricity to surrounding countries
  • Converting to micro LNG for a power plant in surrounding places, including seeking the possibility to integrate operations with other surrounding Production Sharing Contract to achieve higher LNG volume.

The utilisation of gas as a primary source of electricity to help increase the country’s electricity supply and electrification ratio has been very common in Indonesia for many years. However, there are multiple challenges, which present hurdles to the actual commercialization of gas projects. For example: 

  • Location of the gas source and its production site is often located far from the population areas
  • Limited users for the gas power because local business activities are low (or none)
  • Local infrastructure is insufficient.

Currently, JOB Simenggaris is starting to engage with the state-owned company, named Perusahaan Gas Negara (PGN, listed as PGAS) and the local company named Perusda NSP (not listed) to build micro LNG facilities at our field. JOB Simenggaris has also a Gas Sales Agreement with PT PLN (Persero) for building mine-mouth power plant with size 40 MW and its power transmission line to the capital city of North Kalimantan Province.

From the analysis built in this study shows that if the gas produced is less than 5 mmscfd, economically it is feasible to convert the gas into micro LNG to be transported to the surrounding places for peak load of small-scale power plant, i.e. 15 MW.  While if the gas produced is more than 5 mmscfd, then it will provide more room for further expansion so building the transmission line will be beneficial. The right decision of choosing the option between building micro LNG vs mine-mouth power plant will provide energy independence throughout the territory of Indonesia.

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Image courtesy of JOB Pertamina-Medco