Indonesia and fossil gas

With a population of 277.5 million, Indonesia is the world’s fourth most populous country. GDP growth was 5.3% in 2022 and is forecasted to be 4.8% in 2023 and 5% in 2024.

Indonesia was the world’s sixth-largest LNG exporter in 2022; however, due to rapidly declining reserves, the country is expected to become a net gas importer in the next two decades.

This article is part of the Global Energy Monitor coverage of fossil gas

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Fossil Gas in the Fuel Mix

Total gas consumption in Indonesia in 2021 was 37.1 bcm. Almost 80% of Indonesia's gas demand comes from industry and power plants. Fossil gas is projected to account for 22% of power generation in Indonesia in 2028.

In 2021, total electricity generation was 309.4 TWh. Of this, 56.3 TWh was generated through gas and 190 TWh through coal. Renewable energy resources and hydropower contributed 31.5 TWh and 24.7 TWh, respectively. The national energy plan sets a renewable energy target of 23% of the power generation energy mix by 2025, from the 13% share in 2020.

The APEC Energy Demand and Supply Outlook 2022 forecasts gas demand to rapidly increase by 2050, with the power and industrial sectors being the biggest drivers. According to the Outlook, the power sector will account for over half of the country's gas consumption (52%), followed by the industrial sector (28%).

Indonesia is currently prioritizing gas resources for domestic needs. In 2004, as a result of increasing domestic demand, Indonesia imposed a domestic market obligation that mandated gas producers and LNG plants divert at least 25% of their production to the domestic market.

Nevertheless, the forecasts suggest that the country will become a net importer of gas by 2040. By 2050, over 30% of the gas demand will be dependent on imports.

Indonesia is among the largest greenhouse gas emitters in the world. According to Indonesia's enhanced NDC submission in 2022, the country aims to achieve an emission reduction target of 31.89% unconditionally and 43.20% conditionally with international assistance.

Fossil Gas Production, Imports, and Transportation

As of 2022, Indonesia had 54.83 trillion cubic feet of gas reserves.

The Jangkrik gas field, operated by Eni and located in the Muara Bakau in the Kutei basin, started production in mid-2017, with supply routed to the Bontang LNG terminal via the East Kalimantan pipeline. Peak gas production is estimated at 450 mmscfd, and total proven reserves are estimated at 1.3 trillion cubic feet.

The Merakes gas field, located offshore of Kalimantan, was discovered by Eni in 2014. In 2018, the development plan was approved by the Ministry of Energy and Mineral Resources. Gas production began in 2021. The supply is used in the domestic market as well as shipped to the Bontang LNG plant.

In 2019, Neptune Energy, Eni, and Pertamina were awarded the West Ganal production sharing contract (PSC). The block, located offshore East Kalimantan in the Kutei Basin, includes the Maha discovery, which has estimated gas reserves of 600 billion cubic feet. The consortium will drill four exploratory wells during the first exploration period. The first exploration well drilling started in April 2021.

In early 2019, Repsol and partners announced a large discovery at the KBD-2X in the Sakakemang Block in South Sumatra. Preliminary estimates show 2 trillion cubic feet of recoverable resources. The gas field was estimated to come on stream in 2022. However, the projects seem to be hanging in the balance as a subsequent appraisal suggested a decrease of about 75% in the reserves, bringing the volumes down to about 500 billion cubic feet of gas.

The East Natuna gas field is located in the Natuna Sea off the coast of Western Kalimantan and is considered to be the largest undeveloped gas field in offshore Asia. This gas field contains an estimated 46 trillion cubic feet of recoverable unconventional shale gas reserves. The high CO2 content makes the production costs much higher than for conventional gas. In 2017, ExxonMobil stated that it would no longer pursue discussions or activity involving the East Natuna gas block due to environmental and cost concerns.

The Indonesia Deepwater Development (IDD) was taken over by Eni when Chevron sold its stake in the gas venture in late 2020. The IDD project is located in the Makassar Strait and includes the development of the Bangka, Gendalo, and Gehem gas fields. In 2019, IDD had daily gas production of 33 mmscfd from the Bangka field, and peak gas output is estimated to reach 700-800 mmscfd. Total gas reserves are estimated at 2.3 trillion cubic feet. The upstream regulator SKK Migas expects the IDD project to be fully onstream in 2026. The gas from the IDD project is proposed to supply the Bontang LNG terminal.

Total gas production in Indonesia as of 2021 was 59.3 bcm. Domestic gas production has steadily declined after reaching a peak of 87 bcm in 2010.

While domestic production in Indonesia has steadily declined since 2010, recent developments could increase production levels to 90 bcm by 2030, according to an OIES forecast. Long-term domestic production in Indonesia will largely depend on new discoveries and unconventional gas production.

Approximately half of domestic production is consumed in Indonesia, with the rest exported as LNG and pipeline gas. LNG exports were 14.6 bcm in 2021, with the majority going to China (6.6 bcm), South Korea (3.3 bcm), and Japan (2.6 bcm). Total pipeline exports were 7.5 bcm, including 7.2 bcm to Singapore and 0.4 bcm to Malaysia.

The government has announced that pipeline exports to Singapore will stop in 2023 and that the gas supply will be diverted for use in the domestic market. Approximately 6.66 mtpa (of a total 16.56 mtpa) of LNG export contracts will expire in 2020-2025, with an additional 7.3 mtpa of export contracts expiring in 2025-2030.

Starting in 2014, Indonesia began internally moving LNG from their export terminals to receiving terminals in other parts of Indonesia. This movement of LNG mostly involves relocating gas from the eastern part of the country (Bontang, Tangguh, and Donggi-Senoro export terminal) to the Western region (Arun, West Java, Lampung, and Bali import terminal). From 2016 and 2019, this internal LNG movement ranged between 4.01 to 4.39 bcm per year.

Government Agencies and other Key Players in Gas Sector

PT Pertamina controls most upstream oil and gas activities. PT Pertamina Gas (Pertagas) is a wholly-owned subsidiary of PT Pertamina. PT Perusahaan Gas Negara (PGN), of which PT Pertamina is a 57% shareholder, operates the gas transmission and distribution grid. PT Perusahaan Listrik Negara (PLN) is a government owned corporation that is responsible for the majority of Indonesia’s power generation and has exclusive authority over the transmission, distribution, and supply of electricity.

Special Taskforce for Upstream Oil and Gas Business Activities (SKK MIGAS) manages upstream oil and gas activities through joint cooperation contracts under the umbrella of the Ministry of Energy and Mineral Resources (MEMR). MEMR creates and applies energy policy and awards contracts.

Four companies have at least a 10% share of gas produced, including BP with 16.9% share of production, ConocoPhillips with 13.2%, Eni at 10.5%, and two divisions of Peramina that together account for a 25.8% stake in production.