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Indonesia’s LNG imports continue to rise despite economic downturn

30 Jun, 2020
187
Indonesia’s
Port of Kuala Tanjung, Indonesia, Image by Azhari Siregar.


Indonesia’s LNG imports are expected to be resilient despite COVID-19, with imports expected to hit 3.1 million tonnes (Mt) in the second half of 2020, a 1.2 Mt or 63 per cent increase year-on-year.

Indonesia’s LNG consumption has continued to rise from the second quarter of 2020 at 1.1 Mt and appears to be well-cushioned against the impact of COVID-19. Reduced pipeline gas and low spot prices are likely to support Indonesia’s LNG demand.

The government has also recently introduced a set of regulations aimed at lowering domestic gas price to US$6 per million British thermal unit (mmbtu) for seven key industries and the electricity sector. It is hoped that the measures will improve industrial competitiveness, especially for exports.

Speaking at Wood Mackenzie’s Indonesia Virtual Energy Forum, principal analyst Lucy Cullen said the story of Indonesia is consistent with Asia’s outlook at large.

“The region’s LNG imports will reach 250 Mt this year, a 2.5 per cent increase compared to last year, and could hit 315 Mt in 2025. By 2040, Asia will account for 40 per cent of global LNG consumption with Indonesia and its Southeast Asian neighbours being key engines of this growth.”

“We expect LNG to make up a growing a share of Indonesia’s gas supply mix in the years ahead, offering opportunities for LNG procurement and regasification infrastructure development. But to balance rising consumption, Indonesia also needs to look inwards to address declining production.”

While Tangguh LNG Phase 1 showed strong performance with 117 cargoes delivered last year, the Phase 2 expansion is expected to face delays.

In 2019, bp announced a first delay by a year after the LNG EPC lead-contractor Chiyoda signalled difficulties completing the project on schedule. The project also faced challenges moving labour and materials to the remote location of the plant, while tsunami activity in Eastern Indonesia added to the amount of site preparation work required.

COVID-19 is expected to trigger additional delays with the contractor declaring force majeure in March 2020. Wood Mackenzie expects plant start-up to be delayed to Q2 2022.

According to Wood Mackenzie’s Energy Markets Tool gas’ share of total primary energy demand in Indonesia has been about 12-13 per cent over the past few years.

Cullen said: “Cost of generation and meeting growing electricity demand is key in Indonesia. While coal will always be cheaper, it would be interesting to see in the longer term whether lower gas prices could encourage greater role of gas in the energy mix, and eventually accelerate the country’s energy transition.”

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