Two articles from earlier this year talk about Indonesia’s difficulties meeting its contractual obligations to deliver LNG. Barring a sudden collapse of the entire Indonesian economy, we expect Indonesia to shift to LNG importer status within about a decade
The following article appeared on February 18 in the People’s Daily:
Indonesian government may no longer extend the existing liquefied natural gas (LNG) contracts in the future to meet the surge in the domestic demand, a local media reported here on Thursday.
Another article on March 10 in the Jakarta Post spelled out the reason why:
Natural gas supply and demand in 2010 will see a deficit of 23.3 percent based on demand specified in contracts and commitments combined in relation to available supply. The shortage equals to 2,554 million standard cubic feet per day (mmscfd), an official says.
The deficit results when you take total natural gas production and subtract out first domestic demand and then “demand specified in contracts and commitments”. These contracts, not surprisingly, are with Japan, Korea and China.
The reason for this shortfall is not declining production as one might presume. It is the ever increasing consumption of Indonesian natural gas by Indonesians. This is one of the features of natural gas exporting nations that often gets overlooked — massive increases in internal consumption as exporting nations modernize and their citizens get a taste for modern conveniences like lighting and air conditioning.
There shouldn’t be much question about where natural gas production and consumption are heading in Indonesia — it’s a story we’ve already seen before in oil. Compare the oil and natural gas charts from the Energy Export Databrowser. Just look at the shape of the production and consumption curves and the point at which consumption becomes greater than exports.
These are patterns we have seen before and pretty much always with the same result. It doesn’t take unusual pattern recognition skills to see that Indonesia is headed toward being a natural gas importer in about ten years time. While it is theoretically possible for Indonesia to see reduced internal demand for natural gas going forward, this would be counter to the trend seen in all other developing nations. Whether consumption rises or production falls or perhaps both together, as was the case for oil, Indonesia’s years as an LNG exporter are numbered.
With demand for natural gas rising around the world it will be interesting to see who still has LNG for export in 10 years time.
- Bontang output drop (upstreamonline, Feb. 14, 2011)
- Indonesia’s first LNG receiving terminal to be delayed to 2010 (Reuters, Feb. 09, 2011)