In contrast to crude oil production, Indonesia’s natural gas output has been on the rise each year since 2007. Total gas production in 2010 amounted to 3.28bn standard cu feet per day (scfd), up 8.4% on the previous year’s mark of 3.02bn scfd and 16.8% over the 2.81bn scfd in 2007, according to Indonesia’s Directorate General of Oil and Gas (DGOG).

According to the “BP Statistical Review of World Energy” published in June 2011, Indonesia had proven natural gas reserves of 108trn cu feet in 2010 – the eleventh-largest reserves on the planet and the largest in the Asia Pacific region. The country also has an additional 49trn cu feet of potential reserves.

Large international oil and gas companies are well represented in the country’s gas exploration and production segment led by Total E&P Indonesia with 32% of all production as of December 2010. ConocoPhillips ranked second, with 15%, followed by state-owned Pertamina with 14%, BP Tangguh (13%) and ExxonMobil Oil Indonesia (8%).

HOPES FOR OFFSHORE EXPANSION: While the majority of natural gas is still derived from onshore fields, the government estimates that nearly three-quarters of its proven reserves lie offshore. Most significant production in the country is currently centred around four areas: East Kalimantan’s offshore fields, including the Mahakam Block operated by Total; South Sumatra, including the Corridor concession operated by ConocoPhilips; North Sumatra, with the maturing Arun field operated by Exxon Mobil; and the offshore Block B, also run by ConocoPhilips, located in the South Natuna Sea.

EFFORTS AT HOME: In recent years the country has shifted from being a primarily gas-exporting nation to looking inward in its search to provide for its own growing domestic consumption. Some prime examples of this are the decisions to allocate the expected 100m-scfd natural gas output from the Ruby Field project (which is not expected to be operational until the third quarter of 2013) to the country’s largest fertiliser plant, run by state-controlled Pupuk Kalimantan Timur in East Kalimantan. Similarly, the entire gas output from the Terang Sirasun Batur and Ujung Pangkah development project of 300m scfd and 150m scfd, respectively, are being routed to fuel power plants for electricity generation and industrial use in West Java.

Additionally, the new Donggi-Senoro liquefied natural gas (LNG) plant has 30% of its future production earmarked for domestic consumption, along with one-third of the planned output of the Masela floating LNG liquefaction terminal. Indonesia’s largest LNG facility, Bontang, is also being retasked to supply the domestic market, according to the Executive Agency for Upstream Oil and Gas Activity ( BPMIGAS), the national energy regulator, which will gradually phase out exports by 2020.

NEW DIGS: As many of the mature gas fields, such as Arun, continue to drop off in terms of production, a host of newer sources are coming on-line to provide the country with a steadily increasing supply of natural gas. BPMIGAS has approved 10 large-scale gas-oriented projects for the 2011-14 period, which will have a combined natural gas output of 1.75bn scfd, along with 26,000 barrels per day (bpd) of gas condensate compared to 20,000 bpd of oil.

The 10 projects will require some $4.73bn in investment, and only one will produce oil. Other potentially major projects on the horizon include the East Natuna Block in the South China Sea to the north of the country and the Masela Block in the Timor Sea, in the south-east.

NANTUNA BLOCK: The Natuna block has attracted significant interest, mostly as it is believed to hold vast amounts of reserves in the neighbourhood of 46trn cu feet of gas. Formerly known as the Natuna D-Alpha Block, the site has a long and complicated history due to its location – being relatively close to Malaysia, West Java and Singapore – as well as its tricky gas composition, as initial testing has shown the block’s gas contains approximately 70% carbon dioxide. The project is currently being developed by an international consortium of Total (France), Petronas (Malaysia), ExxonMobil (US) and Pertamina, with production expected as early as 2021.

US-headquartered Chevron is also pursuing Indonesia’s first deep-water gas venture in the Gendalo-Gehem project located off East Kalimantan. Developed in conjunction with Italy’s Eni and China’s Sinopec, the project spans four PSC blocks and is hoped to produce up to 1.1bn cu feet per day (bcfd) of gas and 31,000 bpd of condensate. BPMIGAS has stated that the initial phase of development will be in the Bangka field as early as 2014. Finally, Japan’s Inpex is developing the Masela project in the Arafuru Sea, which is estimated to possess some 14trn cu feet of natural gas.

LNG: Since leading the world in LNG exports as recently as 2005, Indonesia has slipped to the slipped to second as LNG exports have fallen off, particularly in light of domestic gas shortages. As of 2010, Indonesia exported 11% of the world’s LNG, far behind leader Qatar at 25% but ahead of neighbouring Malaysia (10%), Oman (9%) and Nigeria (8%) according to the “BP Statistical Review of World Energy”. Primary purchasers of Indonesian LNG are Japan, South Korea, Taiwan, Mexico and China. “Despite the shortage in gas supply, the majority of gas in the country is exported in the form of LNG as producers can command higher prices on international markets,” said Hanung Budya, the CEO of Indonesian LNG producer Badak LNG.

MAJOR LNG PRODUCERS: The country currently has three major LNG plants with a combined capacity of 42m metric tonnes per annum (mtpa). The largest plant, located in East Kalimantan, is the Bontang facility, with a capacity of 21.6m mtpa. The Arun LNG plant is located in Aceh and has a capacity of 12.8m mtpa. The third LNG plant, Tangguh, began operations in mid-2009 with a capacity of 7.6m mtpa and is located in West Papua.

The majority partner and operator of the Tangguh plant, BP Indonesia, in August 2011 announced plans to construct a third LNG train at the plant after it discovered new reserves in the Tanggu gas field. The addition is expected to be operational by 2018, boosting total capacity by 3.8m mtpa. Tangguh is owned by BP Indonesia (37.16%), along with MI Berau (16.3%), CNOOC (13.9%), Nippon Oil Exploration (12.23%), KG Berau/KG Wiriagar (10%), LNG Japan Corporation (7.35%) and Talisman (3.06%).

A fourth plant, the Donggi Senoro LNG (DSLNG) facility being constructed on the island of Sulawesi, is also slated come on-line in late 2014. A joint venture between Sulawesi LNG Development, which holds 59.9% of DSLNG, Pertamina Hulu Energy (29%) and Medco Energy International (11.1%), the plant will produce 2m mtpa and 47,000 bpd of associated condensate when completed. Japan’s Mitsubishi Corporation owns 75% of Sulawesi LNG, with South Korea’s taking up the remaining 25%.

The $3.7bn project will utilise natural gas supplies from the Matindok and Senoro gas fields operated by Senoro Gas Development. Additionally, a contract to sell 1m mtpa of LNG to Japan’s Chubu Power Company to fuel its power thermal power plants has already been drawn up. Export agreements were also signed with South Korea’s Kogas to buy 700,000 tonnes of LNG per year as well as with Electric Power Company, also from Japan, for 300,000 tonnes, according to DSLNG officials. The gas sales contracts span 13 years, starting in 2014, with pricing set at around $12 per million standard cu feet.

RESERVES FOR THE FUTURE: The Matindok field holds an estimated 600bn cu feet of natural gas reserves, with the adjacent Senoro field boasting even larger estimated reserves of between 1.42trn and 1.76trn cu feet. The two fields are expected to produce up to 415bn British thermal units of gas per day (btud), 300bn btud of which is dedicated to the LNG plant, with the remaining 115bn btud allocated for power provider PLN (60bn btud) and ammonia producer Panca Amara Utama (55bn btud).