Opinion and Editorial November 05, 2006
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Accelerating the development of natural gas News & Views
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Latest News Opinion and Editorial - November 02, 2006
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Gallery Hanan Nugroho, Jakarta
Weekly Roundup
Past Editions The Oil and Gas Downstream Regulatory Body (BPH Migas) Resources announced in mid-June that Bakrie & Brothers had won the
Acronyms "special right" bidding for the US$1.2 billion, 1,120-kilometer
Addresses natural gas pipeline from East Kalimantan to Central Java. Indonesian Cabinet Previously, on March 1, the BPH Migas awarded a similar special Indonesian History right to state-owned engineering and construction company PT RI-GAM MOU Rekayasa Industri, to develop the Cirebon-Semarang gas State of the Nation Address 2006 transmission pipeline (230 km), and state oil and gas company PT
President's Pertamina, to develop the Semarang-Gresik pipeline (250 km). Inauguration Speech
Tsunami Declaration It is not really important which -- or whose -- company won the
IMF Reforms tender for the special right to develop and operate those pipelines. Anniversary Edition From the point of view of the national energy mix, including 2004 Elections securing our energy/gas supply, the development and operation of Links an efficient gas network in this country is very important. Where to go
Members Area We have been too late in developing energy infrastructure to meet Register our domestic needs, in particular for natural gas. While maintaining Login our status as the world's largest exporter of liquefied natural gas Archives
Who's Who (LNG), we have allowed ourselves to be trapped by a heavy dependency on oil-based fuels, the prices of which are now About Us skyrocketing and demand huge subsidies. Company Info
Online Media Kit
Print Media Kit Presidential Decree No. 5/2006 on the National Energy Policy sets
a target for improving the national energy mix by 2025: The share of natural gas is to be increased from 27 to 30 percent and the share of coal from 14 to 33 percent, but the share of oil-based fuels
would be cut to less than 20 percent from 55 percent at present.
Energy as a commodity has a unique characteristic: Its consumption is possible only if the infrastructure connecting
Associates production fields and consumption centers is available/built. A
healthier energy mix, as set by the presidential decree, requires the acceleration of energy infrastructure development, particularly for coal and natural gas.
In a country where the energy sector is owned/controlled by the state and energy resources become a major source of state revenue (notably from exports), a proposal for increasing the use of those energy resources for domestic consumption is definitely challenging. The Finance Ministry would prefer the stream of Search revenue from LNG export to continue. The Energy and Mineral Resources Ministry also seems comfortable with the old system
whereby the bulk of our gas is exported.
However, domestic use, rather than exports, of natural gas would be more beneficial for the national economy. The security of our gas supply would assure investors that their power and energy needs will be met. This in turn would spur new investments in both natural gas-based industries and other manufacturing industries as well.
Malaysia, which has less natural gas reserves than Indonesia but is able to maintain its status as the third-largest exporter of LNG in the world, is a good example of a country that has succeeded in developing natural gas infrastructure for its domestic use/benefits.
Efforts to develop domestic natural gas infrastructure and industry in Malaysia were initially opposed by the country's finance ministry and even from inside Petronas, Malaysia's state oil and gas company. But the development of a domestic gas network finally went ahead, driven by a strong belief that such a strategy would, in the long run, benefit the country more than boosting the exploitation of its natural gas for export.
In line with Malaysia's energy diversification strategy, Petronas had since 1984 implemented the three-phase Peninsular Gas Utilization (PGU) project, i.e. an infrastructure development project to process and transmit natural gas from the offshore fields of Trengganu to end-users in the power and industrial and commercial sectors.
In December 1997, the final phase of the PGU project was completed. The entire PGU system now spans over 1,700 km in the western and eastern part of the peninsula, comprising main gas transmission pipelines, supply pipelines and laterals. The PGU project has now become the backbone for Malaysia's industrialization process.
In addition, Malaysia imports natural gas from Indonesia's Natuna block using a pipeline system. Malaysia's petrochemical industry leads farther than ours. In meeting the growing demand for cleaner liquid fuels, Malaysia has further moved to develop a gas to liquid (GTL) industry in Bintulu, one of the pioneers in the world. Malaysia is ambitious about developing its position as the hub for natural gas flow in Southeast Asia.
There is no longer strong opposition to the development of domestic gas infrastructure because the government's budget no longer depends mainly on oil and gas. Moreover, the investment for the construction of domestic gas pipelines is being funded mainly by private investors through the Public-Private Partnership scheme.
Compared to what has been built in the importing countries of our gas/LNG export -- Japan, South Korea, Taiwan -- our domestic infrastructure for natural gas delivery is quite poor. A lot of our gas is burned in foreign countries, but very few of our households consume natural gas. We also need to reduce our high dependency on oil.
Now the momentum for the development of infrastructure to expand domestic use of natural gas has risen, we will within the next few years see a vast network of gas pipelines across the country.
Imagine natural gas flow from South Sumatra to West Java, and through the Trans Java pipelines to East Java. Gas from East Kalimantan is sent through a pipeline system to Central Java, and distributed to West and East Java.
Later on, LNG receiving terminals will be built in West Java, East Java and Batam to supply gas coming from Tangguh in Papua and other liquefaction plants.
The number of gas consumers will increase sharply and more power plants using natural gas will electrify cities. All this will in turn generate economic growth.
The reliable domestic natural gas supply system as described above will be materialized only if efforts to develop each segment of the infrastructure are immediately started to form an efficient natural gas interconnection network.
We are at the beginning of such a strategic step and hopefully we will have the energy to develop a reliable natural gas infrastructure to fulfill our country's needs.
The writer is a National Gas Market analyst.
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