Indonesia may opt for preferential LNG exports


Indonesia's energy regulator said Friday that nations willing to invest in the country's hydrocarbon sector would get priority for liquefied natural gas deliveries as rising domestic demand has curtailed the amount of gas available for export.

Indonesia is a key LNG exporter to Asian countries like Japan and South Korea, but increasing domestic demand due to a growing economy and political pressure to control local resources is forcing the government to divert exports to local consumers.

"As domestic demand has increased rapidly, priority is now given to supply domestic customers. However, with current and future potential reserves, Indonesia will be able to maintain its contribution to the export market," Widhyawan Prawiraatmadja, deputy of planning at SKKMigas, said at the LNG Supplies for Asian Markets conference in Singapore.

SKKMigas is a unit of Indonesia's Ministry of Energy and Mineral Resources tasked with overseeing the upstream oil and gas sector.

Despite world-class coal deposits, 4 trillion cubic meters of proven gas reserves and 3.9 billion barrels of proven oil reserves, Indonesia isn't keeping pace with the energy needs of its fast-expanding population of 248 million and near 6% economic growth.

Mr. Prawiraatmadja said the government is caught in a dilemma between controlling hydrocarbon output for domestic needs and attracting oil and gas majors to prevent exploration activity from stagnating.

However, Indonesia needs to attract foreign investment in the upstream hydrocarbon sector to help develop new reserves and maintain economic growth, he said.

Indonesia used to be a member of the Organization of the Petroleum Exporting Countries until 2008, as it became a net oil importer. It is now looking to its large gas reserves to boost energy exports.

Although foreign investors are wary of political uncertainty and red tape, some new gas investments have materialized.

In June last year, Japan's Inpex, Royal Dutch Shell and Indonesia's state-owned Pertamina agreed to invest an initial $12 billion to develop offshore gas deposits, and spending may rise to $20 billion.

In November, BP gained government approval for a third LNG processing plant at its 37%-owned Tangguh project in Indonesia's West Papua province.

Oil and gas investment in Indonesia may rise by a fifth to $26.2 billion in 2013 from the $21.9 billion commitment last year, SKKMigas said earlier this month.

Dow Jones Newswires

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