Indonesian natural gas producers have signed a multi-party gas swap agreement with Indonesian and Singaporean traders aimed at increasing gas supply security in western Indonesia.
As gas production in Sumatra in western Indonesia is falling, local companies and regulators looks to redirect domestic gas supply to meet local demand while selling overseas gas from other areas.
In a deal signed on Wednesday, Indonesian gas producer Medco Energi Internasional signed a multi-party swap agreement with companies including state energy firm PT Pertamina and Singaporean and Indonesian gas traders Oil Natuna Sea B.V., Star Energy (Kakap) Ltd., Sembcorp Gas Pte Ltd., Gas Supply Pte Ltd., Petrochina International Jabung Ltd., and PT Perusahaan Gas Negara (Persero) Tbk (PGN).
Under the agreement, specific gas volumes will be supplied to Singapore from the West Natuna Supply Group, replacing volumes currently delivered from Corridor Block and Jabung PSC, the so-called South Sumatra Sellers. These redirected volumes will then be allocated to meet domestic gas demand, with PGN serving as the domestic buyer.
“This collaboration demonstrates a strong example of productive synergy between upstream operators, the regulator, partners and buyers in ensuring gas supply across both domestic and international markets,” MedcoEnergi director and chief operating officer, Ronald Gunawan, said in a statement.
Indonesian gas demand is rising, while production at some legacy gas fields is dropping.
The country has started replacing diesel as a fuel in dozens of power plants with LNG, which is set to boost demand for natural gas in one of the world’s top LNG exporters.
Last month, Indonesia awarded five strategic oil and gas blocks to international and domestic players in a bid to reverse its decade-long production decline and bolster energy security.
The awards are part of Indonesia’s broader upstream revival strategy, with nearly 60 additional blocks expected to be offered over the coming years.
“The government hopes these auction winners will be able to contribute to Indonesia’s energy security ahead,” said Tri Winarno, a senior official at the Ministry of Energy and Mineral Resources.
By Charles Kennedy for Oilprice.com
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