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Gas supply from Sumatra to Singapore to ease under new contract from 2023
- INDONESIA
- Friday, 28 Oct 2022
8:30 PM MYT
SINGAPORE (The Straits Times/Asia News Network): The volume of Indonesian gas supplied to Singapore from South Sumatra will fall under a new five-year contract that starts from 2023, said Indonesia’s Minister for Energy and Mineral Resources Arifin Tasrif.
Indonesia and Singapore have been negotiating a new contract for the supply of piped gas from South Sumatra.
Arifin told The Straits Times on Tuesday (Oct 25) that Indonesia will continue supplying natural gas to Singapore from South Sumatra when an existing 20-year sales agreement expires in 2023.
Singapore relies heavily on gas for industry and power generation, with 95 per cent of the Republic’s electricity generated using natural gas.
Indonesia supplies gas to Singapore via two pipelines: the 468km Grissik-Batam-Singapore pipeline from Sumatra island and the 654km West Natuna-Singapore subsea gas pipeline. The gas from West Natuna is supplied under a separate contract.
In a separate interview on the sidelines of the Singapore International Energy Week on Wednesday, Arifin said the amount of gas sent to Singapore from the South Sumatra gas field, called Corridor Block, would be “a bit lower”.
He did not give specific figures, but added: “What we can guarantee is that (slightly lower) amount, but in case there is any excess, we are ready to offer an additional amount.”
Arifin said there would be a maximum and a minimum range.
“This is dependent on the production side,” he said.
Asked why the contract period was shortened to five years, Arifin said: “Because, as of late, we cannot guarantee long-term supplies. Why? Because we recently found out that our source is depleting, and local demand is increasing.”
Arifin said Indonesia was looking to boost supplies from fields in Aceh and East Java.
He added that there was a plan to build two pipeline connections – one between Semarang and Cirebon in Java and one from north to central Sumatra. Doing so would create connections across the length of both Sumatra and Java.
ST understands that the gas supply agreement that is due to expire in 2023 involves Singapore firm Gas Supply, which signed a gas sales agreement with Indonesian state oil firm Pertamina in February 2001 for the supply of 2.27 trillion standard cubic feet of natural gas from South Sumatra, valued at US$9 billion (S$12.7 billion).
The agreement took effect in 2003 and was contracted to run for 20 years.
Analysts also expect pipeline volumes from South Sumatra to be lower, and that Singapore will become more reliant on liquefied natural gas (LNG) imports.
“The volumes of around 150 million standard cubic feet per day or less, for a period of five to 10 years, might be discussed for the renewed gas supply contract for exports to Singapore via their Grissik-Batam-Singapore pipeline,” said Mr Prateek Pandey, vice-president of exploration and production research in South-east Asia for Rystad Energy.
He said the year-on-year production decline at Corridor Block in 2022 was likely to be around 5.5 per cent.
“The concern is that there are barely any new developments planned from the block, and given the maturity of the producing fields, it’s likely that the production decline will be higher going forward despite consistent drilling efforts.
“Additional volumes from Corridor Block will be diverted to the domestic market to compensate for the declining volumes from other mega blocks in Indonesia,” he said.
Kaushal Ramesh, senior LNG and power markets analyst at Rystad Energy, said Singapore had long prepared to be 100 per cent dependent on LNG.
“Therefore, while additional gas would have been good to have from a diversity of supply perspective, it’s unlikely to have caught us by surprise that Indonesia will reduce volumes,” he added.
Kaushal said that as at 2021, 63 per cent of Singapore’s gas came from pipeline supplies and 37 per cent from LNG, adding: “By 2030, the balance will likely be 90 per cent LNG, 10 per cent pipeline gas, with LNG taking dominance at around 2024.”
Gas supply from Sumatra to Singapore to ease under new contract from 2023
SINGAPORE (The Straits Times/Asia News Network): The volume of Indonesian gas supplied to Singapore from South Sumatra will fall under a new five-year contract that starts from 2023, said Indonesia’s Minister for Energy and Mineral Resources Arifin Tasrif.
