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Economic slow-down weakens domestic LNG demand

JAKARTA ( – Global and economic slowdown has resulted in a slowing down of demand for liquefied natural gas (LNG) from domestic market. Domestic floating storage and regasification units (FSRUs) could not absorb all gas (LNG) delivered from producers.

Deputy Head of the Special Task Force for Upstream Oil and Gas (SKK Migas) M. Zikrullah said during a hearing with the Commission VII of the House of Representative (DPR) which oversees energy sector said out of 68 LNG cargoes allocated for domestic market this year, only 47 cargoes that have been absorbed.

This means that the agency would offer the excess cargoes in the spot market.

He said the falling demand is due to slowing down of economy which leads to weakening demand for energy from manufacturers, prompting power producers to cut LNG purchase.

He said FSRU Lampung, owned by PT Perusahaan Gas Negara Tbk, was supposed to receive 14 LNG cargoes this year, however, PGN is only able to purchase 5 cargoes. “Again, the five cargoes have not been taken,” Zikrullah was quoted by Bisnis Indonesia as saying.

He said PGN is yet to take the LNG cargoes from Tangguh LNG project in West Papua as it has yet to finalize gas purchase price with state electricity company PT PLN. In 2014, FSRU Lampung purchase 4 LNG cargoes from Tangguh LNG.

If PGN failed to realize the purchase, SKK Migas will sell the 5 LNG cargoes to the spot market.

Meanwhile, PLN prioritizes opted to prioritize the use of gas delivered via pipeline as it is cheaper and LNG, which needs to be regasified before it is consumed, therefore it is more expensive.

Zikrullah said the LNG purchase of FSRU West Java is in line with the annual plan. The FSRU is committed to purchase 24 LNG cargoes from Bontang LNG plant. As of end May, FSRU West Java has purchased 11 cargoes.

Meanwhile Arun LNG terminal, operated by a Petamina subsidiary, PT Pertagas Niaga, expects to get 6 LNG cargoes this year. So far, Arun LNG is committed to purchase 1 LNG.

Given this circumstance, PT Pertagas Niaga, considers to cut gas price delivered to power plants and industrial consumers. President Director of Pertagas Niaga Jugi Prajugio said that Arun LNG terminal sets gas price at US$13-US$14 per MMBTU, including toll fee of US$2.58 per MMBTU.

The price of gas for Sei Mangke indusrial zone, which is 26 km away from Arun LNG, is set at US$17 per MMBTU, including toll fee of US$3 per MMBTU. President Director of Pertagas Hendra Jaya said the gas price may still be considered expensive by some players as the transportation costs is expensive.

In Malaysia, the gas price currently falls to US$3.87 per MMBTU, while Singapore sets gas price for industries at US$3.58 per MMBTU. (*)


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