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NEWS UPDATES 22 November 2009

Indonesian gas producers told to focus on domestic market

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Staying true to its pledge to prioritise domestic demand, Indonesian government is seeking to evaluate gas purchase contracts that are nearing expiry to ensure the availability of supply for the local market, the Jakarta Post reported.

The evaluation is to make sure that once their current contracts end, gas producers meet domestic gas demand first before resuming exports, State SOE Minister Mustafa Abubakar told reporters Friday.

"The gas companies have been told to prioritise domestic demand first before deciding to extend their contracts with foreign companies," said Mustafa. "We will evaluate gas contracts from certain local gas companies that are soon to expire so we can prioritize domestic demand," he said.

Indonesia is listed as the world's third-largest liquefied natural gas (LNG) exporter. Japan and South Korea are the main export markets for Indonesian gas. However, the country is now facing a significant rise in domestic demand for gas, including from state electricity monopoly PT PLN, state gas distributor PT PGN, and industry - notably fertiliser and ceramics companies.

The government has set targets for total gas production to reach 7,320 mmscfd this year, slightly lower than the 7,900 mmscfd reached in 2008.  Fertilizer producers have also identified their inability to secure adequate gas supplies as the main cause of fertiliser shortages. They claim that due to the gas supply shortages, they have been operating at below their installed production capacity.


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