RI gas demand to increase as fuel subsidy dries up
Moch. N. Kurniawan, The Jakarta Post, Jakarta
With the progressive reduction in the fuel subsidy and its complete removal in 2004, the use of compressed natural gas (CNG) as a source of energy in the country will inevitably rise particularly due to a combination of the lower price compared to fuel, and improved gas transmission systems.
State-owned oil and gas firm Pertamina upstream deputy director Eteng A. Salam said last week that gas would start taking over oil-based fuel as the fuel subsidy is gradually lifted.
"The demand for gas is continuously growing and will increase more after the fuel subsidy is (completely) removed," he said.
Pertamina has said that domestic demand for gas would grow by between 5 percent and 8 percent per year over the next several years.
It said the country's gas utilization had been relatively flat at between 8.15 to 8.38 billion cubic feet per day (bcfd) since 1997.
The government has been gradually cutting the fuel subsidy since the country tumbled into the 1997 financial crisis in a bid to ease the burden of the state budget.
This month, the government will announce another fuel price hike of between 20 percent and 25 percent as a consequence of a further reduction in the fuel subsidy.
At present, the government sells fuel to two distinct users, industrial users and public users.
For industrial users, the government sells the fuel at 50 percent of the international price and sets the price monthly.
In January, the price for industrial diesel oil is Rp 740 (7.08 U.S. cents) per liter, kerosene Rp 820 per liter and fuel oil Rp 615 per liter, automotive diesel oil Rp 900 per liter and gasoline at Rp 1,450 per liter.
In comparison, gas for industrial users is sold at US$3 per million metric British thermal unit or 11.79 cents per liter, which is still relatively more expensive than the price of the heavily-subsidized fuel products.
Eteng said Pertamina had anticipated the growing gas demand in the country by founding new gas reserves and developing new gas pipelines.
"We will explore more gas reserves and develop more gas pipelines," he said.
He said Pertamina had discovered several gas reserves including in the Donggi gas fields, in Central Sulawesi with proven reserves of 3.9 tcf, and some small gas reserves in East Java in the Suci gas fields.
Pertamina and state gas company PGN had also jointly developed pipelines from South Sumatra to West Java, which will deliver gas from Prabumulih gas fields in South Sumatra to West Java at 250 mmcfd starting 2005, Eteng added.
PGN also plans to develop several major pipeline projects to connect East Java and West Java, East Kalimantan and East Java. It is not clear, however, when the projects will commence.
At present, the existing gas pipelines connect Pagerungan gas fields to Gresik (East Java), Cirebon to Cilegon (West Java), Palembang (South Sumatra) to Duri (Riau) and West Natuna to Singapore.
Pertamina and PGN control the gas distribution system in the country and charge other oil and gas companies that use the pipelines to deliver their gas to consumers.
Power, fertilizers and other industries absorb about 26 percent of the 8.15 bcfd. Another 63 percent of the country's gas is exported in the form of liquefied natural gas (LNG), while the remainder is flared and lost.
The country's total proven and potential gas reserves stand at 160.8 tcf.
In the field of LNG export, the country's LNG also has new potential buyers from China, India, the Philippines and the United States, in addition to existing buyers from Japan, Taiwan and South Korea.
Pertamina and British American firm BP have recently submitted a proposal to supply LNG to China's Guangdong industrial province.
Pertamina has also signed a contract with Philippine energy firm GN Power to supply the latter with 1.3 million metric tons of LNG starting in late 2005 for 15 years to 20 years.
It has also made a preliminary agreement with American energy giant El Paso Corp. to allow the latter to distribute gas from Indonesia to the U.S. market.
According to a study, the prices for oil-based fuel would be extremely expensive in 2010 due to the rising oil demand vis-a- vis the declining world oil production.
At that time, the demand will reach about 90 million to 100 million barrels of oil per day.