Monday, April 23, 2012

Shale Gas to fill Supply-Demand Gap in Indonesia

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The Government of the United States is interested in developing shale gas in Indonesia. The Assistant Secretary at the US Energy Department, David Sandalow, emphasized that it needs longer time and relative higher technology than conventional gas exploration and production.

He said that 5-6 years a go the potential has not been known in the US. But now shale gas has contributed 30 percent of US gas production and it would increase to 49 percent in 2035. This changed the US market gas price dramatically. Now the US average gas market is USD 3 per MBTU. This is of course price without any government subsidy.

According to Mr. Edy Hermantoro, Director of Upstream Oil and Gas Business Development in the Ministry of Energy and Mineral Resources, the increasing demand of oil and gas requires energy diversification effort, for instance, shale gas. Combined (conventional) gas production in South East Asia would not be sufficient to fulfill the rising demand and there will be a huge supply-demand gap in 2020. In Indonesia the shale gas potential is projected in many areas: Northern Sumatera, Southern Sumatera, Lampung, Central Java, East Java, Central Kalimantan, Eastern Kalimantan, and West Irian Jaya. It is even planned to have gas pipeline between Kalimantan and Java islands. To attract investors the Government has issued Government Regulation No. 79/2010, in which Cost Recovery is also taken into account. However, this regulation is currently under critic from the Indonesian Petroleum Association (IPA) because it contains negative list that even longer than previous regulation and even includes some non-recoverable items that were recognized by the Government before.

However, if above-mentioned US gas price is to be compared with Indonesian gas price, it should be very cheap. The 2011 gas price in Indonesia is USD 4.00-6.50 for fertilizer producers, 4.55-6.07 for electricity (practically the PLN - Perusahaan Listrik Negara), USD 4.20-5.40 for Gas Trader, and USD 8.12-13.23 for LNG export.

The late Deputy Minister of Energy and Mineral Resources, Prof. Widjajono Partowidagdo has ever talked that the Indonesian shale gas potential is 574 TSCF, far bigger than CBM which is 453 TCF and conventional natural gas which is 334 TCF. Pertamina even had a plan to import US shale gas.

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