Almost five years ago, energy ministers from countries grouped in the Association of Southeast Asian Nations (ASEAN) reached an agreement to build a regional gas pipeline project, called Trans ASEAN Gas Pipeline (TAGP), to alleviate future energy shortages and bolster regional development.
The TAGP project is expected to link the 10-nation grouping's key natural gas distribution centers with the pipeline structure connecting natural gas sources in the Gulf of Thailand, Sumatra and Indonesia's Natuna islands in the South China Sea according to a memorandum of understanding signed by the ministers in Bali in July 2002.
Seven potential interconnections have been identified under the TAGP project involving a total length of 4,500 kilometers, four of which involve the supply of gas from Indonesia to neighboring ASEAN countries, making Indonesia's position very important in the project.
Indonesia, Singapore and Malaysia have already been linked with gas pipelines. One of the pipeline segments connects a gas field in Grissik, South Sumatra, and Singapore, while two others link the Natuna gas fields and both Singapore and Malaysia.
At present, Indonesia exports 325 million cubic feet of gas per day to Singapore via a undersea pipeline from West Natuna, and 110 million cubic feet per day from a gas field in Grissik. Malaysia's Duyong gas plant also receives gas from West Natuna.
According to the plan, gas pipeline networks will be further linked to other ASEAN members including Thailand, Myanmar, the Philippines, Vietnam, Cambodia and Laos.
However, this plan is likely to become a pipe dream.
Indonesia, which holds the largest gas reserves in the region of approximately 182.5 trillion cubic feet, has changed its gas utilization policy, under which it will use a larger part of its gas output domestically to meet the growing demand for power in the country and for industrial activities.
Against this backdrop, the government said it might not renew existing gas export contracts with Singapore and Malaysia as well as Liquefied Natural Gas (LNG) export contracts with Japan, Taiwan and South Korea.
Instead of expanding its cross-border gas export pipelines, Indonesia is building more pipelines to supply the domestic market.
PT Perusahan Gas Negara (PGN) recently launched the first segment of the 377-km South Sumatra and West Java (SSWJ) pipeline to deliver 250 million cubic feet of gas per day from the Pertamina gas field in Pagardewa, South Sumatra, to industrial areas in Cilegon, Banten, West Java.
The second link, which will deliver up to 400 million cubic feet of gas per day from the Conocophillips gas field in Grissik via Pagardewa and Labuhan Maringgai to Muara Bekasi and Rawa Maju in Bekasi, West Java, will become operational in the fourth quarter of this year.
PGN is constructing a 509-km pipeline from Duri, Riau, to Medan, North Sumatra, with an initial capacity of 350 million cubic feet per day. This will be linked with the existing Trans-Central Sumatra and Grissik-Singapore gas pipelines.
In addition, the government has also named business group Bakrie and Brothers to build a 1,219-km pipeline linking East Kalimantan and Central Java. This project has not commenced due to difficulties in securing its gas supply.
A 2006 presidential decree on national energy policy stipulates that by 2025 the country will increase the use of gas to at least 30 percent of its total energy consumption so that the portion of oil being used can be reduced to 20 percent from approximately 52 percent.
According to a government estimate, the gas demand in Java will reach 4,854 million cubic feet in 2020, more than double the 2,204 million cubic feet used in 2005. This means a higher proportion of Indonesia's gas production should be used to meet the growing domestic demands.
Although gas export contracts with Singapore and Malaysia will last another 15 years, the changes to Indonesia's gas policy will certainly put the proposed ASEAN gas pipeline grid in doubt.