What is the status of various Indonesian LNG projects?

Kerry Anne Shanks's picture
Kerry Anne Shanks, Head of Gas and LNG Research, Wood Mackenzie
Edi Saputra's picture
Edi Saputra, Senior Analyst, Wood Mackenzie
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Gastech News: How is gas priced in the Indonesian market?

Wood Mackenzie: Pricing is currently negotiated on a bilateral basis between buyers and sellers, but must be approved by SKKMigas. Gas delivered by pipeline is generally negotiated on a project-by-project basis using fixed prices with some annual inflationary adjustments.  Indonesian LNG prices are negotiated on a project-by-project basis as well, with prices usually indexed to the oil price.

Gastech News: What is the impact of the proposed gas and LNG aggregator scheme?

Wood Mackenzie: There is an ongoing discussion on the adoption of a single gas aggregator scheme. Currently, companies such as Pertamina, Indonesia's national oil company, PGN the biggest pipeline company and PLN, the electricity company are all making individual efforts to sourcing LNG. A gas aggregator could harmonise domestic prices and improve coordination in the LNG procurement process. However, the scheme would reduce competition and there are questions around how existing gas contracts and privately owned gas and LNG infrastructure would be treated.

Gastech News: What is the status of various Indonesian LNG projects?

Wood Mackenzie: There are three LNG import facilities with a total capacity of 6.3 mmtpa, including the Arun facility which was converted from a liquefaction plant to a regas terminal in 2014. LNG demand is set to grow and new infrastructure will be essential to facilitate imports as existing facilities are either not big enough or not in the right location.

A number of new import terminals are at various stages of development including:

  • The Bali FSU (under construction)
  • Java- 1 CCGT FSRU (on a tender process)
  • Small-scale LNG regas in Central Indonesia (on a tender process)
  • Bojonegara onshore regas (at a planning stage), among others

Gastech News: What are the current LNG supply arrangements and how are these priced?

Wood Mackenzie: In 2015 Indonesia produced 16.5 mmpta of LNG, of which 14 mmtpa was exported and 2.5 mmtpa was sold into the domestic market.  Indonesia has three LNG liquefaction plants in operation: Bontang in East Kalimantan, Donggi-Senoro in Sulawesi and Tangguh in West Papua. Indonesia exports LNG primarily to Japan, China, South Korea and Taiwan. LNG sales are oil indexed typically at between 11 – 13%, with prices into the domestic market relatively similar to those into the export market.

One of the key issues for LNG sold into the local market is the high fixed costs of the existing regas and pipeline infrastructure. The FSRU regas tariffs are between US$3-4/mmbtu  and this has impacted the competitiveness of LNG relative to oil products, particularly in the current low oil price environment. Longer term, Pertamina has contracted US LNG from Cheniere's Corpus Christi project from 2019, and from Total’s portfolio from 2020. Imports from elsewhere are possible, as there are ongoing discussions with a number of potential LNG suppliers.

Gastech News: What does the 35 GW plan mean for LNG?

Wood Mackenzie: The impact on gas and LNG demand will be positive. The 35 GW programme has more than 30% gas in its proposed capacity mix, which contrasts with the 100% coal focus of Crash Build I and coal and geothermal focus of Crash Build II. LNG will be needed to cover the shortfalls in some places due to declining piped gas supply. Several gas-fired power projects will use LNG, such as Java-1 CCGT (2x800 MW), Java-2 CCGT (800 MW), Java-3 peaker  (500 MW) and small peaker plants in Central Indonesia, West Kalimantan and the east of Sumatra.

Existing regas capacity will not be sufficient to cover the additional demand. Moreover, new regas terminals will required in different locations. This offers fresh opportunities for LNG players, both in the form of fuel supply and regas infrastructure development.

Gastech News: What are you most looking forward to at this year’s Gas Indonesia Summit, and what is your final message to our readers?

Wood Mackenzie: We look forward to meeting various gas and LNG players in the summit, amid growing opportunities in the Indonesian gas and power sector. We hope you could join us in this well anticipated event.

The inaugural Gas Indonesia Summit & Exhibition (GIS), officially supported by the Ministry of Energy and Mineral Resources, Indonesia (ESDM) and powered by Gastech, will take place at the Shangri-La Jakarta, Indonesia from 15 to 17 March 2016.


Kerry Anne Shanks will be analysing the “Evolution of gas pricing in Indonesia and dynamics of trade” while Edi Saputra will be speaking about “Balancing Indonesian import and export market”.

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