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Indonesia's Pertamina secures more US LNG as it prepares for gas shortage


Indonesia's state-owned Pertamina has signed a second LNG sales and purchase agreement with US-based Cheniere Energy as it tries to secure volumes to meet an impending gas shortage.

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In a statement released Wednesday, Pertamina said that it will buy 760,000 mt/year from Cheniere's Corpus Christi LNG plant for 20 years starting 2019.

This adds to the 760,000 mt/year that Pertamina has already committed to buy from Cheniere for 20 years starting 2018 -- the SPA for which was signed in December last year -- taking its total LNG imports from Corpus Christi to 1.52 million mt/year, Pertamina said Wednesday. The company had previously said the first LNG deal was for 800,000 mt/year for 20 years. The reason for the discrepancy in volumes was not immediately clear. "The [latest] agreement is consistent with Pertamina's strategy to [keep pace with] Indonesia's [growing] gas demand," Pertamina's gas director, Hari Karyuliarto, said in the statement.

Under the agreement, Pertamina will buy the LNG on a free on board basis for a purchase price indexed to the monthly Henry Hub price plus a fixed component, the company said, adding that Pertamina will use its own vessels to ship the LNG.

Indonesia is projected to be short on gas from 2019 when demand -- for domestic use and LNG exports -- is forecast by the energy ministry to reach 9.66 Bcf/d compared with supply of 9.35 Bcf/d, and the country will need to boost LNG imports to supplement domestic supply.

According to Salis S. Aprilian, senior vice president at Pertamina's Gas Directorate, Indonesia is targeting to secure LNG supplies of 3 million mt/year from 2020 in order to be able to meet its domestic demand while maintaining its LNG export commitments.

Most of the demand growth is going to come from the power and industrial sectors as they switch from other fuels to gas, Aprilian told Platts in an interview in May.

Indonesia, traditionally an LNG exporter, launched a drive to build floating storage regasification units a few years ago, mainly to facilitate gas delivery to the demand centers, which are located mostly on the islands of Java and Sumatra, from supply sources offshore Kalimantan and Papua, in the absence of a pipeline network.

The country's first FSRU -- a 3 million mt/year facility in West Java -- jointly owned by Pertamina and state-owned gas utility Perusahaan Gas Negara started up in May 2012.

Pertamina is also in the process of converting its Arun liquefaction plant in Aceh, North Sumatra, into a regasification facility. This facility, with a capacity of 3 million mt/year, is scheduled to start up in 2015.

The company is also conducting feasibility studies to build three more FSRUs which, if constructed, could increase the country's LNG import capacity by another 5 million mt/year.

Indonesia does not import any LNG currently and the West Java FSRU is regasifying LNG from the BP-led Tangguh project located on the eastern Papua island.

--Anita Nugraha,
--Mriganka Jaipuriyar,
--Edited by Deepa Vijiyasingam,