Indonesia Scrambles to Boost Use of Gas in Energy Transition

Floating Production Unit at Chevron's IDD project (File Photo: Chevron)
Floating Production Unit at Chevron's IDD project (File Photo: Chevron)

Natural gas will play a key role in Indonesia's energy transition, thanks to discoveries in past years as oil production declines, energy official Tutuka Ariadji said on Tuesday.

The southeast Asian nation, which is stepping up development of gas projects such as Masela, and in its deepwater, wants to boost domestic use of the fuel after new discoveries in the Andaman and North Bali-Lombok blocks, Tutuka told Reuters.

"Gas will be very important in substituting energy from oil," Tutuka, who is Indonesia's director-general of oil and gas, said on the sidelines of the Gastech conference.

That was a result of a continuous decline in oil production and efforts to cut imports of crude oil and fuels, he added.

Indonesia is considering steps such as replacing diesel with gas in its eastern power plants, using gas-fuelled trucks on routine routes, and in the production of petrochemicals, fertilizers, ammonia, and methanol.

For example, state energy giant Pertamina plans a blue ammonia plant in eastern Papua using 90 million standard cubic feet per day (mmscfd) of gas from Tangguh, while a methanol project in central Java will use 80 mmscfd of gas, Tutuka said.

Indonesia is also looking to build gas-based industries in the Andaman and in South Sumatra, near future production areas, he said.

In the power sector, the government is expected to maintain a price of $6 per million British thermal units (mmBtu) set for domestic power plants to boost economic growth, he added.


GAS PROJECTS

Among its projects, BP's Tangguh Train-3 liquefied natural gas (LNG) plant will be in commercial operation by year-end, he said.

The project, which has been delayed by natural disasters as well as the COVID-19 pandemic, will add nearly 4 million metric tons of capacity each year to the Tangguh facility.

This year, Shell and Chevron agreed to sell off their stakes in major Indonesian gas projects, a move expected to quicken development of the associated fields. 

Shell agreed to sell its stake in the Masela gas project to Pertamina and Malaysia's national oil and gas company, Petronas IPO.

Eni will take over Chevron's stake and role as operator of the Indonesia Deepwater Development project.

Tutuka told reporters he hoped Eni's acquisition of the Chevron stake would be completed this month or the next. 

Japan's Inpex, the operator of the Masela project, plans to incorporate a carbon capture and storage (CCS) facility in its development plan, with the revision expected to be completed this year.

To swell its reserves, the government is also offering new exploration blocks, among them the Natuna blocks in the South China Sea, which Tutuka said authorities aim to offer to Chinese investors.

Tutuka told Gastech that Indonesia had 15 CCS and carbon capture, storage, and utilization (CCUS) projects in the pipeline, and hoped to spend less than $10 billion for them.

"CCUS is the means to continue using fossil fuel in the future," he said.

To facilitate these projects, the government will reimburse company spending on CCUS projects through a cost recovery scheme, Tutuka said, via a regulation issued this year.

Indonesia is also working on broader regulations for CCS and cross-border carbon trade, he added.

BP Indonesia has the biggest CCS/CCUS project at $2.6 billion, Tutuka said, adding that it is now designing front-end engineering for the project that can store up to 35 million tons of carbon in the first phase.

First carbon injection is expected in 2026, he said.


 (Reuters - Reporting by Florence Tan; Writing by Tony Munroe and Fransiska Nangoy; Editing by Tom Hogue and Clarence Fernandez)

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