Indonesia to buy U.S. LNG and stakes in shale upstream

Indonesia flag and map
Source: DollarPhotoClub

Indonesia, a one-time largest LNG exporter in the world, is now looking to purchase LNG from the U.S. as well as to buy stakes in shale exploration companies – Reuters reported.

As domestic reserves decline, Indonesia – currently the world’s fourth exporter of LNG – is increasingly moving towards cutting exports and increasing imports of gas, as the country moves towards natural gas to fuel domestic industry and transport.

The country’s oil and gas company, Pertamina, is planning to add 1 million tonnes a year from an unnamed American source to the already agreed purchase of 1.6 million tonnes a year from U.S.-based Cheniere Energy Inc starting 2018.

Indonesia’s LNG exports have fallen by 40 per cent since 1999, and while the country’s LNG output is expected to rise to 306 cargoes this year, from 289 cargoes last year, exports will remain steady at 268 cargoes, according to the country’s energy regulator, SKKMigas.

“By 2018, we will need to import gas. Even now, the new administration won’t allow new exports,” Pertamina’s vice president of LNG, Didik Sasongko Widi, said.

To secure natural gas supply, Pertamina is said to plan to buy into shale deposits in the USA, Canada and South America, as well as in LNG producing assets in Australia, East Africa and Asia. Pertamina’s stake in upstream shale companies would have the additional benefit of giving the company access to the necessary know-how that could be used to develop unconventional gas reserves in Indonesia.

“The first step is to secure the LNG supply,” Didik said. “Then we need to mitigate the price risk by going upstream. And then, to connect the whole value chain, we need to go into liquefaction.”

The company plans to set up an LNG trading desk in Singapore next year, where two LNG trades and an in-house strategist will trade physical cargoes. They will later move into financial hedging, Didik said.

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