Overview

Once the world’s largest LNG exporter, Indonesia has dropped back in the rankings in recent years as it shifts its attention to growing demand for gas at home. The country’s LNG exports declined by 10.4%, to 22.4 mtpa, between 2012 and 2013 - putting it in joint fourth place with Nigeria in terms of LNG export volumes, according to the BP Statistical Review of World Energy 2014. Overall gas production also is also slipping, from a peak of 82 billion cubic metres in 2010 to 70.4 bcm in 2013.

Meanwhile, the domestic market’s share of Indonesian gas production is gradually increasing, from nearly 48% in 2003 to 54.5% in 2013, as the government allocates more output to local power plants, fertiliser producers and other industrial buyers. Indonesia became an LNG importer in 2012, and now has two operational FSRUs and more regasifiers in development – including the Arun LNG plant conversion, which is expected to become the third terminal in early 2015.

Most of the LNG supplied to the terminals has so far come from Indonesian LNG plants, but state-run companies are also looking for overseas supplies. Pertamina signed Indonesia’s first import contract in December 2013 with Cheniere Energy’s Corpus Christi export project in Texas to take volumes from about 2018, and an unnamed Indonesian company signed a heads of agreement with the Jordan Cove project in Oregon in October 2013.

At the same time, Indonesia continues to expand its export capacity. The third train at BP’s Tangguh LNG plant is expected to be completed around 2019, followed by Inpex and Shell’s Abadi FLNG in the early 2020s.

However, international investors are cautious about taking big steps in Indonesia. In recent years, the industry has been rattled by a court decision to dissolve former upstream regulator BPMigas in 2012, and by a corruption investigation that extended to the head of the new regulator, SKKMigas, in 2013. A more nationalistic sentiment is also taking hold, with the public wanting more of Indonesia’s resources to be kept in the country.

Page updated: 28/07/2014