Indonesia 'not buying LNG from Singapore'

Jakarta may simply engage S'pore's help to transport gas to western regions: Ministers

Two Cabinet ministers have come out to refute local media reports claiming that Indonesia plans to import liquefied natural gas (LNG) from Singapore in an agreement signed last week.

The deal was criticised by the head of a local energy think-tank who called it a "mismanagement of national oil and gas" resources.

"I will say this once again, the deal contains nothing about LNG purchases (from Singapore)," Coordinating Minister for Maritime Affairs Luhut Pandjaitan said on Thursday. His ministry oversees Indonesia's energy sector.

"Singapore just has the facilities to transport LNG to small plants at faraway places, but the gas comes from us," he added.

His comments followed clarifications by Energy and Mineral Resources Minister Ignasius Jonan and state energy firm Perusahaan Listrik Negara (PLN) director Amir Rosidin.

"The news is not right... (under the deal) Singapore will offer mini LNG tankers to channel our LNG to be used in power plants in the western Indonesian archipelago," Mr Jonan said on Wednesday.

The brouhaha in Jakarta came after it was reported that PLN had signed a heads of agreement (HOA) with two Singapore companies - Keppel Offshore & Marine, and Pavilion Energy - during the Singapore-Indonesia Leaders' Retreat on Sept 7.

Under the HOA, which is non- binding, the three parties would explore opportunities in the development of small-scale LNG distribution in Indonesia, which is one of the world's largest LNG exporters.

This includes the possibility of having vessels from the Singapore firms transport gas from Indonesia, to floating and onshore LNG terminals where it will be re-gasified and used to generate electricity at PLN power plants.

Other initiatives in the HOA include a more in-depth feasibility study relating to LNG distribution, as well as the development of LNG infrastructure in Tanjung Pinang and the Natunas, both of which are in the Riau Islands province near Singapore.

"This HOA is not a contract of buying and selling LNG, but it is for a preparatory study of mini LNG infrastructure with the aim of obtaining the most reliable and efficient logistics solution," said PLN's Mr Amir.

A Keppel spokesman told The Straits Times yesterday the HOA envisages Singapore can be used as an LNG terminal to store and break-bulk LNG from Indonesia, which can then be used to supply small-scale LNG to west Sumatra.

"As part of the HOA, more comprehensive studies will be conducted following the initial feasibility study which demonstrated cost savings and mutual benefits that can arise from collaboration in the small-scale LNG value chain," added the spokesman.

Indonesia is rich in natural resources, but the country's resource nationalists are especially wary about deals that involve foreign investors. The latest agreement, however, is part of proactive efforts by Indonesia and Singapore to enhance joint cooperation in the energy sector.

A Pavilion Energy spokesman said a joint feasibility study was started after President Joko Widodo and Prime Minister Lee Hsien Loong pledged to enhance economic cooperation at their first Leaders' Retreat last November.

The feasibility study would be completed "within the next six months", said Mr Luhut, adding: "So in this context... the HOA signed in Singapore also clearly says that if it is not efficient, we will not do it."

Natural gas supplies about 19 per cent of Indonesia's fast-growing energy requirements, with oil at the top at 41 per cent, followed by coal at 36 per cent.

For Indonesia, the collaboration to distribute LNG may result in more competitive pricing, as most of its gas resources are in the country's far east, making it costly to ship the gas to regions in the west.

A version of this article appeared in the print edition of The Straits Times on September 16, 2017, with the headline 'Indonesia 'not buying LNG from Singapore''. Print Edition | Subscribe