Indonesia to renegotiate for lower term gas exports to Singapore

Indonesia plans to renegotiate its gas supply deal with Singapore, for a contract which expires in 2020, in order to reduce the volume of exports so that it will be able to meet rising domestic demand, coordinating economy minister Hatta Radajasa told reporters late Wednesday on the sidelines of a parliamentary hearing.

“I have ordered the energy ministry and [upstream regulator] BPMigas to renegotiate the contracts, though we may not achieve what we want,” Radajasa said. “I don’t want to breach the contract, but we have to try any possibilities,” he added.

Indonesia has 22-year term supply contracts with Singapore’s Sembcorp and Gas Supply Pte. Ltd., for the period over 1999-2020, to supply a total of 700,000 Mcf/day to both companies. The gas is supplied from fields in South Sumatra and Natuna Island, the chairman of BPMigas R. Priyono told reporters separately.

The Singapore companies were willing to pay as much as $12/MMBtu for the term contract, compared with just $5-6/MMBtu from the domestic buyers, a BPMigas official, who declined to be named, told Platts.

Meanwhile, energy and mines minister Darwin Zahedy Saleh told reporters late Wednesday that Indonesia would use a government-to-government approach instead of business-to-business for the renegotiation.

Indonesian Vice President Boediono said last month that the government would gradually increase its domestic gas price in a bid to boost gas investment and attract foreign investors to sell their Indonesian gas output domestically rather than export. The statement came as many parties urged the government to halt gas and LNG exports and instead, prioritize domestic demand.

BPMigas expects domestic gas demand to increase by 43% to 6 Bcf/d by 2020 from 4.2 Bcf/d in 2007, with the strongest demand coming from the industrial province of Java.

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