Indonesia ready to sell more natural gas to Singapore

Jakarta will also honour its existing contracts: minister
Ronnie Lim, Business Times 22 Oct 08;

'If it's from Sumatra, we cannot sell that, as we need it for domestic use. But if it's from the stranded gas fields in the South China Sea, that's another matter.'

Singapore's concerns about future availability of piped gas supplies from both Indonesia and Malaysia led the Republic to proceed with its plans to build a US$1 billion LNG terminal here which will enable it to import LNG from anywhere in the world.

INDONESIA is prepared to sell more natural gas to Singapore from smaller, isolated gas pockets, or so-called 'stranded fields', in the South China Sea, Purnomo Yusgiantaro, the country's Minister of Energy and Mineral Resources, said yesterday.

It is also committed to fulfilling its current contracts for piped gas supplies to the Republic, he said, although he warned that 'additional volumes (beyond that) may not be available'. Mr Purnomo disclosed this on the sidelines of a conference on liquefied natural gas (LNG) supplies for Asia being held here.

Responding to BT queries on concerns here about future availability of Indonesian piped gas to Singapore beyond the existing gas contracts, he stressed that the country 'will honour its (existing) contracts' with Singapore.

But he said that additional volumes may not be available as Indonesia needs gas for its own growing domestic use, including for fertiliser plants, refineries and for town gas.

'There are, however, some negotiations regarding supply of stranded gas from the South China Sea to Singapore,' he disclosed, although he was not able to specify the volumes available. The gas from these isolated fields can be easily piped through smaller pipelines to connect with the existing, main Indonesia-Singapore gas pipelines, he added, when asked if such stranded gas supplies will be costlier.

Currently, Indonesia has three gas supply agreements (GSAs) with the Republic, with the latest struck in April this year when Sembcorp Gas signed a US$5.5 billion deal to buy an additional 86 million standard cubic feet of gas daily (mscfd) for seven to 10 years, with the gas scheduled to start arriving between 2010 and 2011.

The latest GSA will add about 26 per cent to the 325-340 mscfd of Indonesian gas which Sembcorp currently imports - under a 1998 deal - via a 700km Natuna-Singapore pipeline.

Another importer, Gas Supply, is bringing in 350 mscfd of Indonesian gas via pipeline from Sumatra.

Indonesia in October last year cancelled a GSA for 110 mscfd with Island Power - which is planning a US$1 billion power station here - as the latter was unable to gain access to the Singapore portion of the Sumatra-Singapore pipeline to bring in the gas. This was due to unresolved commercial issues with the pipeline incumbents. Island, BT understands, is trying to renegotiate a new gas deal with Indonesia.

When asked about this, Mr Purnomo said it all depends where Island is hoping to secure the gas from. 'If it's from Sumatra, we cannot sell that, as we need it for domestic use. But if it's from the stranded gas fields in the South China Sea, that's another matter.'

Singapore's concerns about future availability of piped gas supplies from both Indonesia and Malaysia led the Republic to proceed with its plans to build a US$1 billion LNG terminal here which will enable it to import LNG from anywhere in the world.

The three million tonnes per annum terminal is expected to be ready by 2012 in time for the first expected deliveries of LNG. Asked if Singapore, through its appointed LNG buyer BG Group, had sounded out Indonesia for some LNG supplies, Mr Purnomo said no.

Earlier in his keynote address at the conference organised by Conference Connection, Mr Purnomo said Indonesia is trying to develop new fields to boost its LNG production, although strong domestic demand for gas means that 45 per cent of its natural gas is now needed at home.

The remainder is exported to countries such as Japan and Korea, and new markets like China and the US West Coast. Some of its gas is also piped to Malaysia and Singapore.