Small-scale LNG taking off in Indonesia

Singapore

INDONESIA'S state-run utility Perusahaan Listrik Negara (PLN) has lined up 11 bidders for a tender tied to small-scale liquefied natural gas (LNG) developments across the archipelagic nation.

On offer under the tender is a prized contract for the supply, shipping and regasification of LNG to power plants planned at 32 locations in Java, Sulawesi and Kalimantan under President Joko Widodo's 35,000 megawatt electrification programme.

The 11 shortlisted companies are understood to be Shell, Pertamina, MedcoEnergi, Marubeni, Tokyo Gas, Osaka Gas, Perusahaan Gas Negara, Itochu, Gas Natural Fenosa, Mitsubishi and Humpuss Intermoda Transportassi.

These potential participants are expected to either team up or rope in other key players to muster the necessary muscle in trading, storing and shipping LNG within Indonesia.

The tender has experienced some delay on the back of a management reshuffling at PLN, one Indonesian participant told The Business Times. But the resumption of the tender signals the government's commitment to fulfil the delivery of 35,000 MW of electricity across Indonesia by the end of Mr Widodo's presidential term in 2019.

PLN is driving the massive nationwide electrification project, by committing to the construction of 109 power plants. The state-run utility is set to absorb the construction of 35 plants with combined capacity of 10,681 MW, while looking to tie up with the private or independent power producers (IPP) for another 74 plants with total throughput of 25,904 MW.

Supplies of small-scale LNG will fuel PLN's drive, underpinned by dozens of power plants mostly of under 200 MW each across Indonesia.

With no break-bulk capabilities on its own, the sprawling archipelagic nation would have to turn to neighbouring countries for support to meet the small-scale LNG requirements feeding its massive electrification ambition.

These include the island city-state of Singapore, which stands among the first in the region to embark on capacity building to satisfy break-bulk LNG demand.

Singapore LNG, the operator of the sole open-access, multi-user LNG terminal on Jurong Island, has already commenced reloading operations that will facilitate the transhipment of cargoes from large LNG carriers. An SLNG spokesman said in response to a BT query that the existing facilities are technically capable of carrying out reloading and break-bulk operations for LNG carriers ranging from 60,000 cubic metres to 265,000 cubic metres in size.

Neil Semple, principal consultant of consultancy Lantau Group, said: "SLNG is looking at various new ventures, one of which is believed to be loading smaller carriers, and will be well positioned to supply small-scale LNG in the region."

SLNG's six million tonne per annum terminal is undergoing expansion to boost send-out capacity to 11 million tonnes per annum. Meeting PLN's small-scale LNG requirements, however, is likely to lead to further investment in break-bulk facilities. This takes into consideration that the first mini LNG vessel set to go on charter with PLN is Humpuss Intermoda Transportassi's 20,000 cubic metre LNG vessel Surya Satsuma, which is expected to transport cargoes to a power plant in Bali of around 100 MW throughput.

The LNG aggregator of SLNG is a unit of BG Group, which is being taken over by supermajor Shell.

At a press briefing earlier this week, Shell executive vice-president for integrated gas, Maarten Wetselaar, confirmed that the supermajor was among 11 shortlisted bidders for small-scale LNG in Indonesia, without naming the specific project. Mr Wetselaar sees Singapore as potentially taking on a "big role in global LNG", given that the island nation has been building break-bulk capabilities to transship LNG to mid-sized vessels.

The Shell executive also described the integrated solution being pursued by Indonesia to combine LNG and power generation developments, "as a very powerful concept" for archipelagic countries. The Shell executive believes Indonesia will press on with small-scale LNG developments despite an immediate LNG supply glut in the country. The cleaner burning fuel will substitute costlier diesel used to power up satellite islands across the South-east Asia nation, he explained.

Shell is open to working "with partners into power plants ... to develop this kind of business", he said.