Indonesia and fossil gas
Indonesia is expected to become the fourth-largest economy in the world by 2040. GDP growth is forecasted at 6.11% for 2021 and is estimated to remain above 5% through 2025. Indonesia's population is estimated to increase by 52 million to reach 319 million in 2045.
The national energy plan sets a renewable energy target of 23% of the power generation energy mix by 2025, from the 13% share in 2020.
In 2018, total electricity generation was 267.3 TWh. Electricity demand is projected to reach 2,214 TWh in 2050. Electricity demand growth is projected at 6.42% and 56.6 GW of power plants will be built by 2028 according to the 2019-2028 RUPTL.
PT Pertamina controls most upstream oil and gas activities. PT Pertamina Gas (Pertagas) is a wholly-owned subsidiary of PT Pertamina. PT Perusahaan Gas Negara (PGN), of which PT Pertamina is a 57% shareholder, operates the gas transmission and distribution grid. PT Perusahaan Listrik Negara (PLN) is the government owned corporation that is responsible for the majority of Indonesia’s power generation and has exclusive powers over the transmission, distribution, and supply of electricity.
Special Taskforce for Upstream Oil and Gas Business Activities (SKK MIGAS) manages upstream oil and gas activities through Joint Cooperation Contracts, under the umbrella of the Ministry of Energy and Mineral Resources (MEMR). MEMR creates and applies energy policy and awards contracts.
Four companies have at least a 10% share of gas produced, including, BP with 16.9% share of production, ConocoPhillips with 13.2%, Eni at 10.5%, and two divisions of Peramina which together account for a 25.8% stake in production.
Natural Gas Demand
Key Demand Drivers
Almost 80% of Indonesia's gas demand comes from industry and power plants.
Electricity demand in industry is projected to increase from 70 TWh in 2018 to 521 TWh in 2050, primarily driven by the metal, fertilizer, and ceramic industries. Since industry accounts for 27.4% of gas consumption as of 2018, the industrial sector will be a major driver of gas demand.
In April 2020, as a result of complaints from large consumers and in an effort to boost industrial activity, Indonesia implemented a price cap of US$6/mmBtu for power plants and large industrial consumers (including: fertilizer, petrochemical, oleochemical, steel, ceramics, glass and rubber gloves industry). Prices were in the range of US$8-9/mmBtu for large industrial consumers before the price cap.
There is minimal natural gas demand from the residential or commercial sectors in Indonesia.
Projection of Demand Growth
The 2019 Indonesia Energy Outlook published by the Indonesian National Energy Council, forecasts primary gas supply at 85.9 bcm in 2025, 107 bcm in 2030, and 168.2 bcm in 2040. The 2019 Indonesia Energy Outlook assumed annual GDP growth of 5.6% and annual population growth of 0.7%.
On the other hand, the APEC Energy Demand and Supply Outlook published in 2019, forecasts gas demand to reach 74 bcm in 2040 and 100 bcm in 2050. Industrial gas demand is projected to grow from 9.5 bcm in 2016 to 25 bcm in 2050.
OIES forecasts a more modest gas demand trend, with demand reaching 55 bcm in 2030 and about 70 bcm in 2040. OIES projects that Indonesia could become a net gas importer around 2040.
Natural Gas Supply
As of 2019, Indonesia had 50.5 trillion cubic feet of gas reserves. LNG exports were 16.5 bcm, the majority going to China, Japan, and South Korea. Total pipeline exports were 7.4 bcm, 0.6 bcm to Malaysia and 6.8 bcm to Singapore. Total gas production in Indonesia as of 2019, was 67.5 bcm. Approximately half of domestic production is consumed in Indonesia with the rest exported as LNG and pipeline gas.
Starting in 2014, Indonesia started internally moving LNG from their export terminals to receiving terminals in other parts of Indonesia. This movement of LNG mostly involves gas from the eastern part of the country (Bontang, Tangguh, and Donggi-Senoro export terminal) to the Western region (Arun, West Java, Lampung, and Bali import terminal). This internal LNG movement ranges between 4.01 to 4.39 bcm.
The government has announced that pipeline exports to Singapore will stop 2023 and that gas supply will be diverted for use in the domestic market. Approximately 6.66 mtpa (of a total 16.56 mtpa) of LNG export contracts will expire in 2020-2025 with an additional 7.3 mtpa of export contracts expiring in 2025-2030.
Domestic gas production has steadily declined after reaching a peak of 87 bcm in 2010. Indonesia was a net gas exporter until 2010. However, domestic production has since declined and has affected supply to LNG plants, including the Arun LNG plant which was shutdown in 2014 due to a lack of gas and then converted into an LNG import terminal.
In 2004 as a result of increasing domestic demand, Indonesia imposed a domestic market obligation which mandated gas producers and LNG plants to divert at least 25% of their production to the domestic market.
Potential New Gas Sources
The Jangkrik gas field, operated by Eni and located in the Muara Bakau in the Kutei basin, started production in mid-2017 with supply routed to the Bontang LNG terminal via the East Kalimantan pipeline. Peak gas production is estimated at 450 mmscfd and total proven reserves are estimated at 1.3 trillion cubic feet.
The Merakes gas field, located offshore of Kalimantan, was discovered by Eni in 2014. In 2018 the development plan was approved by the Ministry of Energy and Mineral Resources. Initial production is targeted at 155 mmcfd and then rising to a peak of 391 mmcfd. First gas is expected in 2021, but has been facing delays. Total gas reserves are estimated at 2 trillion cubic feet. The gas production will be shipped to the Bontang LNG plant.
In 2019, Neptune Energy, Eni, and Pertamina were awarded the West Ganal production sharing contract (PSC). The block, located offshore East Kalimantan in the Kutei Basin, includes the Maha discovery which has estimates gas reserves of 600 billion cubic feet. The consortium will drill four exploratory wells during the first exploration period.
In early 2019, Repsol and partners announced a large discovery at the KBD-2X in the Sakakemang Block in South Sumatra. Preliminary estimates show 2 trillion cubic feet of recoverable resources. The gas field is estimated to come onstream in 2022. IHS-Markit estimates production at 270 mmscfd for 20 years from 2024.
The East Natuna gas field is located in the Natuna Sea off the coast of Western Kalimantan and is considered to be the largest undeveloped gas field in offshore Asia. This gas field contains an estimated 46 trillion cubic feet of recoverable unconventional shale gas reserves. The high CO2 content makes the production costs much higher than conventional gas. In 2017, ExxonMobil stated that it would no longer pursue discussions or activity involving the East Natuna natural gas block due to environmental and cost concerns.
Current Gas Supply Projects
The Indonesia Deepwater Development (IDD) was taken over by Eni when Chevron sold its stake in the gas venture in late 2020. The IDD project is located in the Makassar Strait and includes the development of the Bangka, Gendalo, and Gehem gas fields. In 2019, IDD had daily gas production of 33 mmscfd from the Bangka field and peak gas output is estimated to reach 700-800 mmscfd. Total gas reserves are estimated at 2.3 trillion cubic feet. The upstream regulatory SKK Migas expects the IDD project to be fully onstream in 2026. The natural gas from the IDD project is proposed to supply the Bontang LNG terminal. 
Proposed Gas Supply Projects
The Abadi gas field, located in the offshore Masela Block in the Arufura Sea, is operated by Inpex (65%) and Shell (35%) and estimated to contain 10.7 trillion cubic feet of gas reserves. In July 2020, Shell indicated that it was planning to sell its stake in the Abadi LNG project which could further delay the project. The Abadi gas field is expected to produce 1,200 mmscfd of pipeline gas for domestic supply. The Abadi LNG project also includes the construction of the Abadi LNG Terminal, expected to be complete in 2028, which will have a capacity of 9.5 mtpa of LNG. The remoteness of the onshore facility and the need to build a 150 km pipeline are challenges for the development of this project.
The Jambaran-Tiung Biru (JTB) project, headed by Pertamina and located in the eastern Java, is a project with several gas reserves and involves the construction and operation of gas processing facilities and pipelines. Total gas reserves are estimated at 2.5 trillion cubic feet and the project has a targeted production capacity of 192 mmscfd with an expected start in 2021. The JTB project will transport gas through the Gresik-Semerang pipeline and will supply the Tambak Lorok Gas Plant and the proposed Jawa-3 Power Plant in the Central and East Java regions.
BP's Tangguh LNG terminal is undergoing an expansion. A third processing train with a capacity of 3 mtpa is being added to the facility, which will bring total capacity to 11.4 mtpa. However, numerous delays, including due to COVID-19, have pushed back start of operations to late 2021. Approximately 75% of production from The Tangguh LNG Train 3 will be allocated to Indonesia's state power utility and the rest will be exported. A fourth LNG train is also planned to be developed in the future. 
Industrial Sector Developments
In 2020, China's Delong Holding announced plans to increase the annual capacity of its steel project to 20 million tonnes up from its current capacity of 3.5 million tonnes in the Morowali Industrial Park in Central Sulawesi. State-owned steelmaker, PT Krakatau, is also planning to raise total capacity to 10 million tonnes per year by 2025 to its steel production.
In 2020, Indonesia approved environmental impact studies for battery-grade nickel chemicals factories in Morowali, China's stainless steel company, Tsinghan Group, is looking to construct a high-pressure acid leaching plant in the Morowali. There are currently five nickel plants being built as Indonesia looks to expand on its nickel resources. The nickel smelting park, Indonesia Weda Bay Industrial Park, expected to complete construction of four nickel processing plants in 2021 which would double its capacity. In 2019 Indonesia banned the export of unprocessed nickel ore in response to increased local demand.
Table 1: Proposed LNG Terminals in Indonesia
|Project Name||Location||Capacity||Expected Commencement Date||Sponsor||Project Status||Interconnected Projects & Main Users|
|Abadi LNG Terminal||Masela Block, Maluku Province||9.5 mtpa LNG;
150 mmcfd pipeline gas
|2028||INPEX (65%), Shell (35%)||MoU signed with PLN and Final Investment Decision by 2022||Abadi gas field|
|Aceh-Nias LNG Terminal||Aceh||PT Perusahaan Gas Negara (PGN)||Proposed||Will supply gas for the areas of Nias and Krueng|
|Cilacep FSRU||Cilacap, Central Java||1.4 mtpa||Pertamina, PGN||Proposed||Will support gas demand at expanded Cilacep refinery|
|Ambon LNG Terminal||Ambon, Maluku||PT Perusahaan Gas Negara (PGN)||Proposed||Will supply island of Sulawesi and the island of Papua|
|Karimun Island LNG Terminal||Karimun Island, Riau Province||2024||Panbil Group||Proposed; Feasibility study underway||Gas supply possibly from Tangguh Train 3|
|Batam LNG Terminal||Batam||1.0 mtpa||2022-2023||JFE Engineering, Medco Energi||Proposed||Will supply island of Batam|
Table 2: Proposed Gas Power Plants in Indonesia
|Project Name||Location||Capacity||Expected Start||Sponsor||Project Details/Status|
|Belawan Power Station Unit #3||Belawan||430 MW||2024||PT PLN (Persero)||Proposed in RUPTL 2019|
|Perak Add-on||Pasuruan, East Java||400 MW||TBA||PT Indonesia Power||Proposed|
|Krakatau Daya Listrik Power Station||Cilegon||120 MW||TBA||PT Krakatau Daya Listrik||Proposed|
|Riau Combined Cycle Power Station||Pekanburu, Riau||Unit I: 275 MW
Unit II: 250 MW
|Unit I: 2022
Unit II: 2024
|Medco Power, Ratch Group||Proposed|
|Sumbagut Gas and Steam Power Plant||East Java and North Sumatera||Unit I: 200 MW
Unit II: 300 MW
Unit III: 300 MW
|Unit I: 2022
Unit II: 2024
Unit III: 2028
|PT Pembangkitan Jawa Bali||Proposed in RUPTL 2019|
|Sumbagselte Gas and Steam Power Plant||South Sumatra||300 MW||2023||PT Pembangkitan Jawa Bali||Proposed in RUPTL 2019|
|Madura Gas and Steam Power Plant||Madura Island, East Java Province||450 MW||2024||PT PLN (Persero)||Proposed in RUPTL 2019|
|Kalbar Peaker 2 Power Station||West Kalimantan||250 MW||2029-2030||PT PLN (Persero)||Proposed in RUPTL 2019|
|Jawa-3 Power Plant||Gresik, East Java||800 MW||2023||PT Pembangkitan Jawa Bali||Proposed in RUPTL 2019|
|Kalsel 1 Power Plant Unit 1 & 2||South Kalimantan||Unit I: 200 MW
Unit II: 100 MW
|Unit I: 2021
Unit II: 2027
|Proposed in RUPTL 2019|
|Kalteng Power Plant||Central Kalimantan||100 MW||2023||Proposed in RUPTL 2019|
|Kaltim Peaker Power Station||East Kalimantan||100 MW||2021||PT PLN (Persero)||Proposed in RUPTL 2019|
|Luwuk Power Plant||Central Sulawesi||150 MW||2021||Proposed in RUPTL 2019|
|Makassar Power Plant||South Sulawesi||200 MW||2023||Proposed in RUPTL 2019|
|Minahasa Power Plant||North Sulawesi||150 MW||2022||Proposed in RUPTL 2019|
|Pontianak Peaker||West Kalimantan||80 MW||2021||PT PLN (Persero)||Proposed in RUPTL 2019|
|Sulbagut 1 Power Plant||North Sulawesi||200 MW||2026||Proposed in RUPTL 2019|
|Sulsel Power Plant||South Sulawesi||450 MW||2027||Proposed in RUPTL 2019|
Table 3: Proposed Gas Pipeline Projects in Indonesia
|Project Name||Capacity||Owner||Expected Start||Length (km)||Diameter (inches)|
|Central Kalimantan-South Kalimantan Gas Pipeline||162 km|
|Cirebon-KHT Gas Pipeline||Rekind||2021||84 km|
|Cirebon-Semarang Gas Pipeline||3.6 - 5.2 bcm/yr||PT Pertagas||2023||235 km|
|Natuna-West Kalimantan Gas Pipeline||687 km|
|West Kalimantan-Central Kalimantan Gas Pipeline||TBD||1018 km|
|Amagasaki-Kumiyama Gas Pipeline||Osaka Gas||2028||49 km|
|Abadi Gas Pipeline||1.6 bcm/yr||Indian Oil Corporation Limited, Oil and Natural Gas Corporation Limited, Gail Limited, Ministry of Petroleum and Natural Gas, Oil India Limited||2028||150 km|
Projection of Gas Production
While domestic production in Indonesia has steadily declined since 2010, recent developments could increase production levels to 90 bcm by 2030, according to an OIES forecast.
The 2019 Indonesia Energy Outlook published by the Indonesian National Energy Council, forecasts gas production to fall to 68.37 bcm in 2030, rise to 74.25 bcm in 2040, and fall back to 68.06 bcm in 2050.
The APEC Energy Demand and Supply Outlook published in 2019, forecasts domestic gas production to remain unchanged at 66 bcm through 2050.
Long-term domestic production in Indonesia will largely depend on new discoveries and unconventional gas production.
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