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Gas supply for industrial sector still falls short of requirement.

Backgrounds

Natural gas is used as a source of energy and feedstock for industries in Indonesia such as petrochemical, fertilizer, and steel industries. In line with the Oil and Gas Law No. 22 of 2001, the government gives priority for domestic requirement in gas distribution amid dwindling oil reserves and production.

Development of gas industry, however, is still facing problem with the fact that gas reserves are spread in areas far from the consumers or the market. Gas transmission networks, therefore, have to be built with a huge investment.

According to the energy and mineral resources (ESDM), the country's production of natural gas has fluctuated. Gas production in 2008 to 2010 grew from 7,460 MMSCF to 8,857 MMSCF, but fell in 2011 and 2012 to 8,415 MMSCF and 8,167 MMSCF respectively. The decline in gas production resulted in shortage in supply to the industry.

In the next several years, the industrial sector is forecast to continue to suffer shortage in gas supply, despite additional supplies from new gas fields. Most of the country's gas production has been exported under long term contracts such as with Japan, South Korea and Taiwan. In addition, gas price is much higher in export market than the selling price on the domestic market.

For fertilizer industry, natural gas is vitally important to feed fertilizer factories mainly urea fertilizer producers. Natural gas is the main feedstock for urea fertilizer.

Gas supply for fertilizer industry has been guaranteed by the government through an ESDM ministerial regulation No. 3 of 2010. The government has set a priority scale for gas consumption. Gas production is first set aside for oil and gas processing industry, fertilizer industry, power plants of state electricity company PLN, and other industries. The government has sought to cut export of liquefied natural gas (LNG) in favor of domestic consumption, and standardized gas price similar to Indonesian crude price. Currently, only 25% of the country's gas production is for domestic consumption with 75% exported.

Indonesia's Gas Production

In order to raise gas production to meet domestic requirement, the government through a regulation of the ESDM minister No. 2/2008, has ruled the holders of cooperation contract (KKKS) to set aside 25% of their production of oil and gas for domestic market for which they will receive subsidy incentive in the form of domestic market obligation fee (DMO fee) in line with the cooperation contract.

In the period of 2008-2012, the country's gas production fluctuated. After rising to 8,857 MMSCFD in 2010 from 7,962 MMSCFD in the previous year, the production fell to 8,415 MMSCFD in 2011 and to 8,167 MMSCFD in 2012. The decline was attributable mainly to shrinking production of Total E&P Indonesie and BP Berau Ltd.

The country's production of natural gas in 2012 came mainly from the gas fields operated by Total E&P Indonesie in East Kalimantan, BP Berau Ltd. in Papua, PT Pertamina EP, PT Pertamina Hulu Energi, ConocoPhillips in Sumatra and Natuna, Vico Indonesia in East Kalimantan, and ExxonMobil Oil Indonesia Inc. in Aceh, Petrochina International Jabung, Ltd. in Jambi, PT Pertamina Hulu Energi West Madura Offshore, and Kangean Energy Indonesia, Ltd.

Based on data from the Upstream Oil and Gas Regulator (SKK Migas), the country's production of natural gas in 2013 was estimated at 1.24 mmboepd or around 6.939 MMSCFD. The production fell 15% from 8,167 MMSCFD in 2012.

Distribution of gas for domestic market in 2013 will reach 4,020 billion british thermal unit per day (Bbtud), up 11.2% from 3,615 Bbtud in 2012.

Domestic Gas Consumption

Based on annual report of SKK Migas 2012, the country's total gas consumption reached 7,895.9 BSCFD.

Total demand included 3,775 BSCFD from export market making up 47.8% and 4,120 BSCFD from domestic market making up 52.2% of the total demand.

Natural gas including in LNG have been exported to seven countries--Japan, South Korea, Taiwan, Singapore, Malaysia, China, and the United States.

In 2012, gas supply to domestic consumers rose significantly compared to previous years. Natural gas in the country is used by fertilizer and petrochemical industries totaling 732.1 BSCFD (9.2%), PLN totaling 792.9 BSCFD (10%), PGN 697.3 BSCFD (8.8%), other sectors totaling 635.6 BSCFD (8.1%), LPG conversion program totaling 77.1 BSCFD (1%), oil lifting 525.7 BSCFD (6.7%).

Realization of New Gas Projects 2012

In 2012, there were 15 new gas projects carried out by a number of KKKS with a total installed production capacity of around 1,158 million SCFD of natural gas.

In the January-May period of 2012, Pertamina Hulu Energi Offshore North West Java started operation of APN A, APN B and APN E/F projects with a total production capacity of 145 MMSCFD.

The Tembang Subsea and Bawal Subsea fields of ConocoPhillips with a production capacity of 40 MMSCFD and 120 MMSCFD each also have been operational.

The Wortel Development field with a capacity of 50 MMSCFD of Santos started operation in January 2012. In addition to gas, it also produces oil averaging

750 BOPD.

Kangean Energy Indonesia in June in 2012 started operation of first phase of the Terang Sirasun Batur field producing 300 MMSCFD. Also coming on line were the Peciko 7B field (122 MMSCFD) and the Sisi Nubi 2A field (122 MMSCFD) of Total E&P Indonesie, and the KE-39, KE-40 and KE-54 (13,600 BOPD) of PHE WMO.

There were also KF Gas Booster of Star Energy (10 MMSCFD), and South Sembakung Gas Plant of JOB Medco Simenggaris (25 MMSCFD); the Gas Gajah Baru field which is operated by Premier Oil exported to ConocoPhillips's buyer in Singapore, and the production of Grissik, which is operated by ConocoPhillips is channeled through the pipeline of PGN to power plant of PLTGU Muara Tawar, Bekasi. Currently gas swap mechanism has been in operation to Singapore, but not yet to domestic market.

Swap is a temporary system until gas from Gajah Baru enters Batam. Gas supply from Gajah Baru to Batam is still waiting for the completion of the installation of pipeline. The plan is gas would be channeled to a 2 x 35 MW power plant to be built by PT Medco Power in Batam to be operational in 2014.

Other gas fields already operational include Bayan A Field of Manhattan (15 MMSCFD and 250 BOPD), Kampung Baru Gas Plant of Energy Equity Epic (35 MMSCFD), Kuat field of Kondur (9 MMSCFD), Seng Gas Plant Phase 2 of Kalila Bentu Ltd (30 MMSCFD), and South Mahakam 1, 2 of Total E&P Indonesie (250 MMSCFD and 20,600 BOPD).

Development of New Gas Fields

The government has encouraged KKKS to boost gas production and accelerate development of new gas fields to meet growing demand for gas in the country.

A number of gas fields expected to be operational soon include Sumpal field with a production of 155 MMSCFD and Sebuku fields 100 MMSCFD to be operational in 2013.

In 2014, there are four gas fields with a total production of 1,467 MMSCFD including A block 109 MMSCFD, Husky-Madura 100 MMSCFD, Donggi-Senoro 420 MMSCFD, and IDD Chevron 838 MMSCFD.

In 2015, there are four other gas fields expected to be in operation with a total production capacity of 397 MMSCFD. They include Jangkrik 128 MMSCFD, Krueng Mane 100 MMSCFD, Kepodang 116 MMSCFD, and Bukit Tua 53 MMSCFD.

In 2017, there are two fields with a total production capacity of 600 MMSCFD including Jambaran, Alas Tua, and Tiung Biru 200 MMSCFD and Masela 400 MMSCFD.

In 2020, Natuna with a production capacity of 1,000 MMSCFD is expected to come on stream to produce gas.

The Sumpal field in South Sumatra, operated by ConocoPhillips is expected to produce gas averaging 155 million cubic feet per day (MMSCFD).

The Ruby field in South Kalimantan is operated by Pearl Oil to turn out gas averaging 100 million cubic feet per day (MMSCFD).

Total E&P Indonesie as the operator of the Mahakam block will also operate new Jempang and Metulang fields in East Kalimantan. The two fields are located south of the Mahakam block in the sea 47 meters deep, around 35 km southeast of Balikpapan and 58 Km south of Peciko field.

The third phase of area development project of South Mahakam consists of installation of additional well head platform and drilling of 7 development wells to be connected with the platform of East-Mandu which is already built earlier during the development phase of South Mahakam with 12-inche pipes extending 7.7 kilometers. The project development is estimated to cost US$306 million including US$185 million for drilling and US$121 million for various facilities.

The process of start-up of the 2 new fields is expected in 2015 and will contribute to maintaining South Mahakam's gas production capacity at the level of 250 mmscfd.

Phases 1 and 2 of development in South Mahakam started in October 2012, earlier than schedule. Areas to be developed include Stupa and East Mandu with 3 new wellhead platforms (Main Stupa, West Stupa and East Mandu), and drilling of 19 development wells.

The entire production of gas and condensate from South Mahakam--phases 1, 2 and 3, is sent through a pipeline of 24 inches extending 67 kilometers from the platform of Stupa to onshore terminal of Senipah, operated by Total E&P Indonesie.

PT Pertamina Hulu Energi Offshore North West Java (PHE ONWJ) is the operator of ONWJ block since July, 2009, covering an area of 8,300 sq. km. in the Java sea north of Cirebon to the Thousand Islands. PHE ONWJ operates offshore oil and natural gas production facilities north of West Java including 670 wells, 170 offshore platforms, 40 processing facilities and around 1,600 km of undersea pipelines.

PHE ONWJ will develop the GG field located in the sea 30 km north of Cirebon, West Java, with an investment of US$152 million.

The GG project has an offshore platform and one Onshore Processing Facility (OPF) in Balongan, connected with 35 kilometer long submarine pipes. The GG field GG will be developed using 3 wells with a production target of 30 mmscfd.

Gas from the GG field would be processed by Pertamina to produce LPG for domestic consumption. The rest could be used to support strategic industries in Indramayu, West Java such as the Balongan RU VI oil refinery, fuel for oil lifting in the X-Ray platform of Pertamina EP, and other companies owned by district administration of Indramayu.

The construction of the Balongan OPF brought the number of onshore gas receiving facilities to four units owned by PHE ONWJ including one each in Muara Karang, Tanjung Priok and Cilamaya.

The Peciko 7B field and the Sisi Nubi 2B field in East Kalimantan, operated by Total E&P Indonesie will produce gas averaging 170 MMSCFD and the Peciko 7C field would produce gas averaging 120 million cubic feet per day (MMSCFD) and oil averaging 280 barrels per day (Barrel Oil Per Day/BOPD).

Petronas Carigali of Malaysia will operate gas reserve in the Kepodang field in the Muria block in Central Java. The Kepodang field will produce gas averaging 116 mmscfd, and the Ketapang field in the Bukit Tua block, Madura, East Java, to produce gas averaging 50 mmscfd and oil averaging 20,000 barrel per day. The two fields are expected to start operation in 2015.

The Jangkrik field in North East in the Muara Bakaun block operated by ENI Indonesia is expected to start operation in 2015. Development of the field is estimated to cost US$1.4 billion. It is located side by side with Cekungan Kutai, East Kalimantan and the IDD project of Chevron.

Chevron Indonesia Company will develop three new projects including Indonesia Deepwater Development (IDD). This project is a deep sea project (Cico) through four production sharing contracts Ganal, Rapak, Makassar Strait and Muara Bakau. There are five gas fields to be developed in the IDD project including Bangka, Gehem, Gendalo, Maha and Gandang fields.

Chevron will operate 28 offshore wells in the seabed in 5 fields integrated through two floating production unit (FPU) hubs and a subsea tie-back. The two FPU hubs are Gendalo hub which is a facility to integrate the fields of Gendalo, Maha, and Gandang at a depth of 2,200 to 5,600 feet and the Gehem Hub which is a production facility of the Gehem field at a depth of 6,000 feet.

The Bangka field at a depth of 3,200 feet would become a subsea tie back to West Seno FPU already in operation by Chevron. The facility is expected to need an investment of US$4 billion to US$7 billion. The Front-end engineering design (FEED) for the Bangka field is already finished in December 2011, and the FEED for the Gendalo-Gehem was completed in April 2012.

The Bangka field is expected to start producing gas in 2015 and production in the Gendalo and Gehem hubs is expected to start in 2017 and 2018 respectively.

The Abadi field is part of the Masela block developed by Inpex Masela LTD. The gas field, which is located in the Arafura sea, has a proven reserve of 6.05 trillion cubic feet (TCF). Inpex will build a floating liquefied natural gas LNG plant with a production capacity of 2.5 million tons per year (MTPA), The LNG project is estimated to cost US$5 billion, to be operational in 2016.

Husky-CNOOC-Madura Limited (HCML) has six wells in the sea off Sampang and Sumenep. A well in the BD field off Sampang is estimated to have a production capacity of 125 mmscfd and five wells in the MDA and MDH fields off Sumenep would produce an estimated 125 mmscfd. The project cost an investment of US$108 million to be operational in 2015.

With a production target of 250 mmscfd, HCML would help provide gas supply for East Java. Currently East Java's gas requirement is around 872 mmscfd, and gas production from 9 KKKS in operation is only 457 mmscfd, that means a deficit of 415 mmscfd.

In 2013, the deficit in gas supply for East Java is expected to rise to 500 mmscfd. It is expected that gas deficit in East Java could be reduced to 75 mmscfd in 2014 with additional supply from for new KKKS.

The four KKKS are LNG Receiving Terminal in Lamongan of Energy World Corporation, Ltd from Australia to contribute 200 mmscfd to 300 mmscfd in 2014, Mobile Cepu Limited (MCL) to contribute 200 mmscfd in 2014, Kangean Energi Indonesia (KEI) to contribute 200 mmscfd and Petronas Field Bukit Tua in 2013.

Gas Requirement of Industrial Sector

According to the industry ministry, gas requirement of 19 sectors of industry in Indonesia is around 2,136.13 million standar cubic feet per day (mmscfd) including 1,022 mmscd of gas as feedstock and 1,114.13 mmscfd as source of energy.

Gas requirement of industries grows from year to year. Therefore, the government sets a 30% growth for gas production per year.

Meanwhile, shortage in supply of natural gas for fertilizer industry and other industries is around 1700 MMSCFD annually in Java in the period of 2012-2014.

Gas requirement could not be fully met from local suppliers. Only 85% of the gas requirement of 850 mmscfd for fertilizer industry could be fulfilled locally. Supplies to other industries are only 65% of the total requirement of 1.900 mmscfd.

Gas requirement for industry in western Java (region IV) is predicted to rise from 1319.45 MMSCFD in 2010, to 1357.29 MMSCFD in 2011, to 1359.35 MMSCFD in 2012, to 1360.65 MMSCFD in 2013 and to an estimated 1362 MMSCFD in 2014.

In central part of Java (region V) supply is secured as requirement is relatively much smaller and there has been guarantee from PT Titis Sampurna. Gas requirement in this region is small and grows slightly from 17.36 MMSCFD in 2010 to 18.12 MMSCFD in 2011 and to an estimated 19.02 MMSCFD in 2012 to 19.97 MMSCFD in 2013 and to 20.96 MMSCFD in 2014.

East Java have additional supply by phases. Additional supply is expected from the gas fields of Terang, Sirasun, and Batur totaling around 405 million cubic feet per day (mmscfd) in line with the request of the East Java administration in 2012-2013. Inadequate infrastructure also cause problem in gas supply to industry.

Gas Supply For Fertilizer Industry Much Short of Requirement

Gas accounts for 50%-60% of the production cost for urea fertilizer. Shortage in gas supply, therefore, would make a big problem for industries producing nitrogen-based fertilizers including urea, ZA and NPK.

Gas requirement for fertilizer industry is expected to grow in the coming years with the revitalization program and construction of new factories. According to the industry ministry, fertilizer industry needed 797 mmscfd of gas in 2012 and the requirement is expected to rise to 821 mmscfd in 2015.

Currently, Pupuk Kalimantan Timur (PKT) is building a new production unit Kaltim-V, Petrokimia Gresik plans to build a new unit PKG-2, Pupuk Sriwidjaja (Pusri) is building Sriwijaya-IIB and Sriwijaya-IIIB, and Pupuk Kujang-1C.

Revitalization of Pusri is pressing as its Pusri II has been too old now 38 years in age and it is no longer efficient. With new factory Pusri II B gas consumption could be saved around 11 mmbtu to 13 mmbtu for each ton of fertilizer.

Pusri is developing coal gasification technology to provide an alternative for natural gas as the feedstock. The coal gasification program has good prospects as around 40% of known coal deposit in the country are found in South Sumatra, not far from the Pusri factories.

Pupuk Kaltim

Pupuk Kaltim (PKT) is carrying out an expansion program by building a new plan Kaltim V to be operation in June 2014.

Kaltim V will replace Kaltim I which will be scrapped for being too old and inefficient.

Kaltim I needs around 80 MMSCFD of gas, which is considered too wasteful. With such gas consumption, a new factory could produce twice as much of fertilizer produced by Kaltim I.

Kaltim V will have a gas supply of 100 MMSCFD from the Ruby field of the Sebuku block in the Makassar strait. The block is operated by Pearl Oil (Sebuku) Ltd which will start production in October 2013. The entire gas production from the Ruby field would be for domestic consumption to feed fertilizer factories as part of the program to support food security.

Gas and condensate are transported through a 312 kilometer long pipeline to the Senipah terminal, Kutai Kartanegara and from there the gas is sent to Pupuk Kaltim with pipe systems.

The Ruby field is designed to produce 214 billion cubic feet (billion cubic feet/BCF) of gas for 10 year. The peak production would be 100 MMSCFD in four years.

Pupuk Sriwijaya Palembang (Pusri)

Pusri is building a new factory, Pusri IIB, over a 6,012 hectare plot of land with an investment of US$561 million. Construction will be handled by a consortium of PT Rekayasa Industri and Toyo Engineering Corporation.

New factory Pusri II-B will replace Pusri II. Pusri IIB is expected to come on line in 2015 and will increase its ammonia production capacity by 2,000 tons per day (660,000 tons per year) and 2,750 tons of urea per day (907,500 tons per year). Pusri IIB will use the KBR Purifier Technology for its ammonia factory and Aces 21 technology of Toyo and Pusri as the Co Licencor for the urea factory.

Pusri II-B could save gas consumption by 10 MMBTU per ton of urea and it would be more environmentally friendly. The power plant of Pusri II-B uses coal for fuel to save gas saving 17 MMSCFD of gas. Its coal requirement used to substitute gas is around 2,188 tons per day (722,000 tons per year).

The government has guaranteed gas supply of 225 mmscfd for Pusri. Gas would be supplied from Pertamina EP of South Sumatra averaging 166 mmscfd under a contract for 2012-2017, for Pusri IB, III, and IV. The Block of South Sumatra Extension (SSE) of k PT Medco EP Indonesia will also supply 45 mmscfd of gas for the fertilizer factories of Pusri II and JOB Talisman will supply 14 mmscfd.

Pusri wants additional supply of 187 mmscfd to feed fertilizer factory of Pusri IB (54 mmscfd), Pusri IIB (63 mmscfd) and IIIB (70 mmscfd). However, the request may not be fully met as there has been no new gas sources found in South Sumatra.

SKK Migas will look for additional supply of gas such as from Medco block SSE, Grissik Conoco Philips and Pertamina EP of Southern Part of Sumatra in Jambi. However, it would depend on the availability of gas transmission pipeline of Perusahaan Gas Negara (PGN) SSWJ II or development of separate pipeline.

PT Pupuk Sriwijaya Palembang will have gas supply from Pertamina EP averaging 166 million standard cubic feet per day (MMSCFD) under a contract of 2013-2017 for a total contract of 286,350 MMSCF. Gas supply for Pusri will be channeled from the gas field of Pertamina EP in the southern part of Sumatra.

Pupuk Iskandar Muda

In February 2013 an agreement was signed between SKK Migas, PT Pertamina (Persero), ExxonMobil Indonesia, PIM, and BP Berau Ltd on gas supply.

PIM will have supply of LNG from the Train 1 and 2 of the Tangguh LNG plant, Teluk Bintuni, Papua of BP Berau Ltd. LNG production of the plan is estimated to reach 107 cargos in 2013, up from 103 cargoes in 2012. A cargo is around 125,000 metric tons.

Of the total production, 8 cargoes would be for domestic consumption including 6 cargoes for PIM di Aceh per year in 2013-2014.

Supply to PIM is made through swap system with LNG Arun of ExxonMobil, in Lhokseumawe, Aceh. Under the swap system, LNG Arun will give gas originally allocated for Kogas of South Korea to PIM and in exchange Tangguh will supply Kogas with the same quantity. The swap system is made as PIM has no receiving terminal for LNG from Tangguh.

LNG production LNG from Tangguh, originally set aside for the US market has been shipped to Kogas at a price of US$24 million per cargo or US$8,5 for a million British thermal unit (mmbtu).

The first shipment was 1 cargo made in April 2013. Shipments will continue until the 6th cargo equivalent to natural gas supplied by Arun LNG to PIM in 20132014.

Originally PIM asked for 8 cargos of LNG with 0.5 cargo to feed the power plant of PT Kertas Kraft Aceh and 1.5 cargoes for the floating terminal of LNG regasification unit (FSRU), West Java.

Pupuk Kujang Cikampek

Pupuk Kujang Cikampek (PKC) in Karawang, West Java, receives gas supply 39 mmscfd from PT Pertamina EP's gas field in West Java. The supply is provided under a 5-year contract starting 2012 valued at US$430.4 million.

In August-September 2013, gas supply from PT Pertamina EP to West Java would be stopped temporarily as there will be periodical repair of gas pipes. PT. Pertamina EP has supplied five industries in West Java with 75 mmscfd of gas from the field.

The suspension of supply forced the suspension of the operation of its PKC 1A. Currently the production capacity of PKC 1A is 570,000 tons per month or 1.14 million tons per year. gas consumption of the factory is 30 million cubic feet or million metric british thermal unit (mmbtu) to 34 mmbtu per tons fertilizer (1 mmscfd is equivalent to 1.165 mmbtu).

Meanwhile, new factory, PKC 2, will have gas supply of 86 mmscfd from Pertamina EP and Pertamina Hulu Energi Offshore North West Java (PHE ONWJ) under a contract to end in 2016. The supply is less than its requirement of 105 mmscfd.

In 2016, PKC will seek allocation of gas supply from the LNG receiving terminal of West Java and will hold negotiation with PGN to buy more gas.

Petrokimia Gresik

So far fertilizer factories of Petrokimia Gresik (PKG) have received gas supply of 65 mmscfd from Kodeco 37 mmscfd, Kangean Energy Indonesia Pagerungan 22 mmscfd, Lengowangi field of JOB Petrochina Tuban 5 mmscfd and the Tanggulangin field of Lapindo Brantas Inc 1.5 mmsfcd.

Extension of gas supply of 60 BBTUD for PKG is allocated from the fields of Terang, Sirasun and Batur starting by the end of 2012.

The new factory of Ammonia-Urea II will have a production capacity of 825,000 tons of ammonia per year and 570,000 tons of urea per year. It will start operation in 2016. Part of its ammonia production would be exported.

The new factory of PKG will have gas supply of 85 million cubic feet per day (MMscfd) from the MDA MBH field ion Offshore Madura Strait block of Husky-CNOOC Madura Limited.

Earlier the government planned to allocate gas for PKG from the Jambaran-Tiung Biru-Cendana field of PT Pertamina EP Cepu under a 20 year contract. The gas price from the Jambaran Jambaran-Tiung Biru-Cendana field of PT Pertamina EP Cepu is US$8 per MMBTU, and a proposed cut in the price is still being negotiated.

The price of gas from the MDA field at the well head is US$6.5 per MMBTU in the first year with an escalation of 3% per year that the average price per year in the 2016-2026 period will average US$7.4 per MMBTU. In addition gas from the MDA field has to be transported via the transmission pipe of East Java Gas Pipeline (EJGP) with a toll fee of US$1.14 per Mscf.

Another advantage is that supply of gas from Jambaran is larger and last longer that gas from the MDA field. Supply of gas from Jambaran could be as high as 185 BBTUD for 17 years as against 85 BBTUD for 9 years from the MDA field.

However, as PKG already has gas supply from Husky, gas from Jambaran would be used to feed PT Pupuk Kujang Cikampek (PKC).

Gas Price Not Up

SKK Migas has guaranteed that gas for industry would be raised to help strengthen the competitiveness of domestic industry ahead of the implementation of Asean Economic Community in 2015.

Earlier SKK Migas planned to raise the price of upstream gas by 40% from US$5.8 per million Btu (British thermal unit) to US$8 per million Btu, but now the plan has apparently be dropped.

Currently the domestic gas prices average US$5 per MMBtu, as against the international price of US$15 per MMBtu.

The economic prices of gas from different gas fields are not the same. So far the government has forced the upstream sector to sell its gas at a price of US$5 per MMBtu, although the economic price of some gas fields is more than US$10 per MMBtu.

The fertilizer industry could not buy gas at market price as the selling prices of fertilizers are also set by the government with a certain highest retail price (HET). Meanwhile, the gas price in international market has tended to increase to follow the oil prices.

Conclusion

In the last five years, the country's production of natural gas has fluctuated from 7,460 MMSCF in 2008 up to 8,857 MMSCF in 2010. In 2010 and 2012, the production fell to 8,415 MMSCF and to 8,167 MMSCF respectively. The decline in gas production caused supply constraint to the industrial sector.

So far, the country's gas producers have been export ortiented as the prices are much higher in international market. In addition big producers have been bound by long term contracts with foreign buyers such as Japan, South Korea and Taiwan.

The government through regulation of the ESDM minister No. 3 of 2010 ruled that gas producer give priority to domestic industries including fertilizer industry in their gas distribution. In 2012, the country's gas requirement for fertilizer industry averaged 635.2 MMSCFD or around 8% of the country's total gas requirement.

In line with the revitalization program, new fertilizer factories have to be built to replace ones too old and infficient. A number of new factories to be built soon include PKT V, Pusri IIB, Pertogres ammonia and urea II units, PKC 2 and PIM.

The new factories have been guaranteed gas supply short term in 2014 and long term until 2023. PKC 2 will have gas supply of 86 MMSCFD from Pertamina Hulu Energi Offshore North West Java, PIM will have supply from ExxonMobil Indonesia, Pusri Palembang will have supply of 166 MMSCFD from Pertamina EP, PKT V will have a supply of 100 MMSCFD from Pearl Oil and PKG to have 85 MMSCFD from Husky CNOOC Madura Ltd.

A number of new gas fields would come on line to supply gas to the new factories but their production would not be enough to feed gas factories with demand growing from year to year.
Table--22

Indonesia's production of natural gas, 2008-2012

 Production gas
Year (MMSCF) Growth (%)

2008 7,460 --
2009 7,962 6.7
2010 8,857 11.2
2011 8,415 -4.9
2012 8,167 -2.9
Average growth 2.5

Sources : ESDM

Table--23

Consumption of gas by sectors, 2012

Sectors Total (BSCFD) Share (%)

Fertilizer 635.2 8.0
Mills 96.9 1.2
Petrochemical 91.5 1.2
Condensation 12.1 0.2
LPG 77.1 1.0
PGN 697.3 8.8
PLN 792.9 10.0
Krakatau Steel 37.4 0.5
Other industries * 635.6 8.1
City Gas 0.27 0.03
Own consumption 518.9 6.6
Sub total 3,595.1 45.5
Exports
Feedstock for LNG 2.793.3 35.4
Pipe gas 981.7 12.4
Sub total 3,775.1 47.8
Losses **
Gas lift and gas reinjection 525.7 6.7
Total 7,895.9 100

Sources : SKK Migas

Note : *) Channeling by KKKS to other industries other
than PGN consumers **) Gas lift & gas reinjection

Table--24

Realization of new gas projects,
2012

 Prod. capacity
No Project (MMSCFD)

1 Wortel Block Sampang, 50
 Madura

2 Tembang Subsea 40

3 APN A, Blok Offshore 50
 Northwest Java (ONWJ)

4 APN B, Block Offshore 45
 Northwest Java (ONWJ)

5 APN E/F, Block Offshore 50
 Northwest Java (ONWJ)

6 South Sembakung Block 25
 Simenggaris, East
 Kalimantan

7 Terang Sirasun Batur-- 300
 Phase 1, East Java

8 Peciko 7B--Extension 122
 Platform, East Kalimantan

9 Bawal Subsea Natuna 120

10 South Mahakam 1 & 2, East 250
 Kalimantan

11 KF Gas Booster 10

12 Gajah Baru, Natuna Barat 140

13 Bayan A Field 15

14 Kampung Baru Gas Plant, 35
 Sengkang

15 Kuat, Malacca strait 9

16 Seng Gas Plant phase 2, 30
 Pelalawan, Riau

17 Sisi Nubi 2A, East 122
 Kalimantan

 Start-up
No Project KKKS production

1 Wortel Block Sampang, Santos January 2012
 Madura

2 Tembang Subsea Conoco-Phillips January 2012
 Indonesia

3 APN A, Blok Offshore Pertamina Hulu Energi January 2012
 Northwest Java (ONWJ) Offshore North West
 Java.

4 APN B, Block Offshore Pertamina Hulu Energi April 2012
 Northwest Java (ONWJ) Offshore North West
 Java

5 APN E/F, Block Offshore Pertamina Hulu Energi May 2012
 Northwest Java (ONWJ) Offshore North West
 Java

6 South Sembakung Block JOB Pertamina-Medco May 2012
 Simenggaris, East Simenggaris Pty. Ltd.
 Kalimantan

7 Terang Sirasun Batur-- Kangean Energy June 2012
 Phase 1, East Java Indonesia

8 Peciko 7B--Extension Total E & P Indonesie June 2012
 Platform, East Kalimantan

9 Bawal Subsea Natuna Conoco-Phillips September
 Indonesia 2012

10 South Mahakam 1 & 2, East Total E & P Indonesie October 2012
 Kalimantan

11 KF Gas Booster Star Energy November
 2012

12 Gajah Baru, Natuna Barat Premier Oil

13 Bayan A Field Manhattan

14 Kampung Baru Gas Plant, Energy Equity Epic
 Sengkang

15 Kuat, Malacca strait Kondur

16 Seng Gas Plant phase 2, Kalila Bentu Ltd
 Pelalawan, Riau

17 Sisi Nubi 2A, East Total E & P Indonesie
 Kalimantan

Sources : SKK Migas

Table--25

Development of new gas fields
2013-2017

 Production capacity
Gas fields (mmscfd)

Sumpal in South Sumatra 155

Ruby, Sebuku block in East 100
Kalimantan

Jambaran Tiung Biru, Cepu block, 200
Central Java

Madura Strait, East Java 100

Donggi Senoro, Banggai, Central 420
Sulawesi

Indonesia Deepwater Development 838

Bukit Tua, Ketapang, Block in East 70
Java

Kepodang, Blok Muria Central Java 116

Jempang and Metulang, East 250
Kalimantan

Field GG, Cirebon 30

Jangkrik North East, Blok Muara 128
Bakaun, Balikpapan, East Kalimantan

Field MDA-MDH, Sumenep, East 250
Java

Krueng Mane, Sumatra seas 100

 Start up
Gas fields Contractors plan

Sumpal in South Sumatra ConocoPhillips 2013

Ruby, Sebuku block in East Pearl Oil 2013
Kalimantan

Jambaran Tiung Biru, Cepu block, Mobil Cepu Limited 2014
Central Java

Madura Strait, East Java Husky Oil 2014

Donggi Senoro, Banggai, Central PT. Donggi Senoro 2014
Sulawesi LNG

Indonesia Deepwater Development Chevron 2014

Bukit Tua, Ketapang, Block in East Petronas Carigali 2015
Java

Kepodang, Blok Muria Central Java Petronas Carigali 2015

Jempang and Metulang, East Total E&P Indonesie 2015
Kalimantan

Field GG, Cirebon Pertamina Hulu 2015
 Energi-ONWJ

Jangkrik North East, Blok Muara ENI Indonesia 2015
Bakaun, Balikpapan, East Kalimantan

Field MDA-MDH, Sumenep, East Husky-CNOOC Madura 2015
Java Limited (HCML)

Krueng Mane, Sumatra seas ENI Indonesia 2015

Sources : ICN processed

Table--26

Gas supply for fertilizer industry 2012

 Gas
 requirement
Companies (Mmcfd) Suppliers Period

Pupuk Kujang 39 -PT. Pertamina EP 2012-2016
Cikampek 86 -PT Pertamina EP and
 Pertamina Hulu Energi
 Offshore North
 West Java
Pupuk Iskandar 6 cargo ExxonMobil Indonesia 2013-2014
 Muda
Pusri Palembang 166 PT. Pertamina EP 2013-2017
Pupuk Kaltim 100 Pearl Oil (Sebuku) Ltd 2013-2023
Petrokimia Gresik 85 Husky-CNOOC Madura Ltd. 2012-2032

Sources : ICN processed

Table--27

Domestic and international market prices of gas, 2013

 Prices
Description (US$ per mmbtu)

Domestic price 5,8
International price 15

Sources : ICN processed
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Title Annotation:INDUSTRY
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Jun 1, 2013
Words:5652
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