May 31, 2023
JAKARTA – The government plans to prohibit the export of liquified natural gas (LNG) to help supply domestic industries, Coordinating Maritime Affairs and Investment Minister Luhut Binsar Pandjaitan announced on Tuesday.
Luhut said the ban would not affect ongoing export contracts but that the policy would apply for contract renewals.
“We have been exporting LNG for many years, but now we need it, as it turns out. We don’t want to export anymore. For ongoing contracts, by all means, continue, but those that have expired, stop,” Luhut said on Tuesday in his opening remarks for the 2023 International and Indonesia Carbon Capture and Storage Forum.
He noted that domestic demand for the commodity was on the rise, particularly in the industrial sector.
This included demand from petrochemical companies, including one production facility in Kalimantan Industrial Park Indonesia (KIPI) in North Kalimantan, which is still under construction and due to finish in either 2025 or 2026.
“So, our petrochemical [industry] needs gas. It has been importing a lot [of LNG], and we are building the industry in North Kalimantan. We need gas,” Luhut said.
“Our own natural gas is enough. We don’t need to import anymore,” he added.
Some 30 percent of Indonesia’s LNG exports have gone to China over the past five years, according to Statistics Indonesia data, and smaller portions have gone to South Korea, Japan and Taiwan.
Indonesia’s natural gas production has been declining in recent years, with the International Energy Association (IEA) recording a three-decade low of 2.3 million terajoules (TJ) of production in 2020, following a peak of 3.48 million TJ in 2010.
IEA data also shows that the country’s consumption has been increasing, led by industrial use.
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Last year, Indonesia missed its natural gas production goal by 7.8 percent of the targeted 5.8 billion standard cubic feet per day (MMSCFD), according to the Upstream Oil and Gas Special Regulatory Taskforce (SKK Migas).
The LNG ban is part of a wider government effort to make further use of many of the country’s export commodities to support domestic added-value industries.
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A bauxite export ban will come into effect in June of this year. It aims to encourage the industry to refine the ore into aluminum or produce higher-level aluminum-based goods.
In January 2020, the government banned the export of nickel ore to promote similar downstream industrial development.
The bans may be bearing some fruit. In the first quarter of this year, some US$2.9 billion in foreign funds was invested in the country’s basic metals industry, making up the lion’s share of the country’s foreign direct investment, followed by the transportation sector at $1.2 billion.