Indonesian gas company PGN expects 8 cargoes for Lampung FSRU

Jakarta-listed gas company PT Perusahaan Gas Negara (PGN) expects its floating storage and

regasification unit (FSRU) in Lampung to absorb up to eight cargoes of liquefied natural gas (LNG) by

year-end amid rising demand.

The state company said that the LNG deliveries were expected to start in April.

“From April to the end of the year, the Lampung FSRU will gradually receive and distribute eight cargoes,

equal to 1.1 million cubic meters of LNG,” PGN corporate secretary Heri Yusup said.

He added that the LNG deliveries would help the company, which operates the Lampung FSRU through

subsidiary PT PGN LNG Indonesia, meet demand from its clients in the eastern part of Java and the

southern part of Sumatra.

The eight cargoes come from the Tangguh LNG plant in Papua operated by BP.

The deliveries will also help Lampung FSRU accelerate recovery after suffering weak demand last year,

partly due to slowing economic growth that resulted in its clients reducing energy consumption.

The FSRU was idle for months in the middle of last year, only to resume operations in October.

The situation forced the company to cancel its plan to ship several LNG cargoes from the Tangguh plant

in West Papua. Under the government’s allocation program, the facility should have received 14 cargoes

from Tangguh in 2015.

The FSRU, which is located around 21 kilometers off Labuan Maringgai in Lampung, has a capacity to

store up to 170,000 m3 of LNG and regasify 240 million standard cubic feet per day (mmscfd).

Gas that has been regasified at the FSRU is then delivered through an undersea pipe to a receiving

terminal in Labuhan Maringgai, which is connected to the South Sumatra West Java (SSWJ) pipeline

network that transports the commodity to its buyers.

To reduce dependency on petroleum-based fuel, the government aims to boost LNG utilization in the

domestic market. Indonesia has long been a major exporter of LNG, particularly because domestic

demand has not been able to absorb the production due to a lack of gas infrastructure.

Gas fields are mostly located in the eastern part of the country, where the demand is low. Meanwhile,

the highest demand is usually seen in the western part of the country, meaning that sufficient facilities

are necessary to ensure transport of the gas from the eastern part.

The Lampung FSRU is among new facilities built to increase domestic absorption. However, issues

surrounding pricing and unfulfilled commitment on account of demand growth miscalculations continue

to hamper domestic absorption.

State-owned power firm PLN is currently the most significant client in the country as it is in need of gas

to fuel its power plants nationwide. However, pricing issues have frequently caused tensions with gas

distributors, such as PGN.

PLN earlier said that it was in search for additional supply. The company’s oil and gas division head,

Chairani Rachmatullah, said PLN had secured 10-year contracts for the delivery of 34 LNG cargoes per

year to feed its power plants.

“However, we will need more and therefore we are currently negotiating with Bontang or Tangguh for

more. We expect to have a long-term contract for 45 LNG cargoes ready to be delivered every year,”

Chairani said.

She added that PLN utilized 38 LNG cargoes last year and estimated that it would be able to absorb up

to 40 cargoes this year.

NGS INDIA