Singapore-based companies Keppel Offshore & Marine and Pavilion Energy last week reached a heads of agreement (HoA) with Indonesia’s state-owned Perusahaan Listrik Negara (PLN) to examine the possibility of developing a system of small-scale LNG deliveries to remote areas of western Indonesia.
The proposal aims to discover opportunities for the delivery of LNG via small tankers to floating and onshore LNG terminals, which will then supply gas to PLN’s thermal power plants (TPPs).
The HoA follows several months of discussions between Indonesia and Keppel about LNG swaps. The governments of Singapore and Indonesia began to discuss bilateral energy co-operation in 2016.
If a swap should materialise, Keppel could supply LNG to Indonesia at a price of US$3.80 per mmBtu (US$105.11 per 1,000 cubic metres), Indonesian Co-ordinating Maritime Affairs Minister Luhut Pandjaitan said recently. He added that the price might also include other benefits such as storage facilities. Luhut said in August that if the deal showed it would offer cheaper LNG then the government would consider it.
Indonesian LNG cost around US$5.52 mmBtu (US$152.68 per 1,000 cubic metres) in June despite a presidential order in 2016 that the price be reduced. A swap deal could result in greater competition, therefore reducing Indonesia’s domestic prices.
Announcing the HoA, Keppel CEO Chris Ong said his company had “a comprehensive suite of solutions for every stage of the gas value chain. We are able to provide cost-effective, end-to-end solutions for our customers.”
The proposal calls for considering LNG deliveries to Indonesian islands that are close to Singapore. Luhut at one point said TPPs in Nias, North Sumatra and Lhoksemauwe were being considered as delivery points. Plants under consideration for deliveries are those with generation capacities of 25-50 MW for a total of 500 MW. PLN is looking at the construction of TPPs in Tanjung Pinang and Natuna, Riau Island, that would have a combined capacity of 240 MW. They too are being considered for the scheme.
In July, Japan’s Nikkei reported that Tokyo Gas was seeking to develop a project to deliver small volumes of LNG to islands in Southeast Asia.
The company is understood to be thinking of installing small LNG storage and power generation facilities in each island and have small vessels make deliveries once a week or so. Investment for such an operation would require tens of millions of dollars, but using LNG for fuel would result in cheaper electricity costs for these locations.
With the backing of Japan’s Ministry of Economy, Trade and Industry (METI), Tokyo Gas will study the idea until spring 2018 and has already launched a feasibility study for the plan in the Philippines, which is considering the possibility of building a large LNG terminal and establish itself as a regional hub.
Demand for LNG in Southeast Asia is expected to expand by 2% per year, according to the International Energy Agency (IEA).