Oslo (The Jakarta Post/ANN) - Indonesia has been one of the world's largest exporters of liquefied natural gas (LNG) since the mid-1970s, but the role of the clean-burning primary energy in the country's electricity generation is still almost negligible.
The problem is that most of the big power generation stations are located in Java while most gas is produced on the outer islands, and Java does not have an onshore LNG receiving terminal, which costs hundreds of millions of dollars to build.
No wonder the two LNG plants at Arun in the northernmost province of Sumatra and in Bontang, East Kalimantan, have been tied to long-term (more than 25 years) contracts because the building of the loading and receiving terminals to handle LNG carriers require billions of dollars of investment.
But the launching last month of Indonesia's first floating storage and regasification unit (FSRU) in Java bay will drastically change the supply and value chain of natural gas.
The power generation station at Muara Karang, north of Jakarta, has begun taking in natural gas from as far as the Bontang plant because the short distance between the FSRU mooring in the Jakarta bay and the power stations can be covered by a submarine pipeline.
The FSRU takes deliveries of LNG from tankers and turns it back into gas (regasification) before pumping it to the power plant through the sub-sea pipeline.
The FSRU, named Nusantara Regas Satu, was built at the Sembawang yard in Singapore by converting an old LNG vessel owned by Golar LNG into floating regasification vessel-based LNG receiving unit.
The facility, which is also Asia's first FSRU, is chartered by PT Nusantara Regas, a joint venture of two state companies - Pertamina oil and gas company and Perusahaan Gas Negara (PGN).
The FSRU with a storage capacity of 125,000 cubic meters enables the quick realization of gas purchases and obviates the need for shore-based LNG storage tanks and regasification facilities.
Later in 2013 or early 2014, the Nusantara Regas Satu will be joined by an even larger FSRU, with a storage capacity of 170,000 cubic meters, currently under construction at the South Korean Hyundai shipyard.
Earlier this year, PGN and Norway's Hoegh LNG signed a 20-year contract, extendable by 10 years, under which the Norwegian fully-integrated LNG service company will provide PGN with an FSRU and mooring system offshore of Lampung, in southern Sumatra.
Different from the first FSRU in Java bay, which was converted from an old LNG tanker, the second facility will employ the first of Hoegh LNG's new building regasification vessels.
"We have three FSRUs currently under construction at Hyundai and one of them will be moored offshore Lampung," Hoegh LNG's vice president Geimund Aasbo told The Jakarta Post in Oslo last week.
The project, scheduled to come on stream in early 2014, includes construction, lease and operation of an FSRU with an associated mooring system, a contract for pipeline and necessary infrastructure and a tie-in with an existing grid connected to the power station onshore.
"With more than 40 years of experience in LNG transportation services, Hoegh has been operating two FSRUs and five LNG vessels, all under long contracts, to energy companies in the global LNG value chain," Aasbo added.
There are now 14 FSRUs operating worldwide with seven others, including the one destined for Indonesia, still under construction in South Korea.
The FSRU facility will greatly improve Indonesia's energy security, especially because most of the hydrocarbon discoveries in recent years are gas, such as the Senoro and Matindok fields in Central Sulawesi with combined proven reserves of 2.4 trillion cubic feet, and the Masela block in the Arafura Sea, south of Papua, with reserves of 6.5 trillion cubic feet and the huge BP gas field at Tangguh in Papua.
"I expect hydrocarbon discoveries in the eastern part of Indonesia will consist mostly of natural gas," said Statoil Indonesia CEO Tor Fjaeran.
Though a newcomer in Indonesia's petroleum industry, the Norwegian state oil company Statoil has been operating a deep-water Karama production sharing contract offshore West Sulawesi and has farmed into nine other concessions, all of which are offshore in the eastern region.
Natural gas is cleaner than other fossil fuels, and gas-fired power plants are relatively cheap to build, fueling a stronger demand for gas.
As LNG transportation has now been made much easier with the FSRU, it also allows LNG spot markets to expand.
The International Energy Agency, a watchdog for the developed countries, has estimated LNG trade to increase to more than 395 billion cubic meters in 2015.
Most LNG is still sold under long-term contracts that underpin the billions of dollars of investments required for liquefaction plants. But the massive expansion of regasification capacities has created bigger opportunities along the global LNG value chain.
We can imagine in the coming years a fleet of small tankers on regular runs across the country carrying LNG from Bontang, BP Tangguh plant in Papua, Shell's Masela plant in the Arafura sea or Pertamina-Medco Senoro-Matindok's plant in Central Sulawesi and supplying the gas to electricity plants, which are currently run on expensive diesel or fuel oil.
The FRSU infrastructure will make all that possible.
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