*** Kolom Pakar PInter*** - WELCOMING NEW PARADIGM IN GAS UTILIZATION

The issue of energy security has become headlines to date. The shortage of supply and problem on distributing fuel oil, gas, and electricity across the nation are obvious. Gas shortage, especially in Java Island, takes place in many industries ranging from power generation, fertilizer, steel, ceramics, and others. Not only for heavy industries, has the gas shortage also wiped out many small and medium enterprises (SME) in various sectors. In the meantime, lack of infrastructures has delayed gas distribution to the households which also have the right to take the advantages of gas utilization as a cheap and clean energy source.

While Indonesia has 3P gas reserve about 180 TCF and has stepped up to be one of the main players in Liquefied Natural Gas (LNG) for three decades, then, why does such acute shortage happen? Very limited infrastructure facilities are not the one to be blamed. Rather, I would say that lack of common vision, understanding, innovation, and awareness of how the natural gas can benefit the country play significant role.

Similar to the satellite system in telecommunication sector, Indonesia was also pioneering the LNG industry in early 1970s. Indonesia, then, all of a sudden becomes the world’s biggest producers and exporter. However, continuously exporting gas to Japan, Taiwan, and Korea also means that Indonesia has thrown away all of the chances and incentives to build domestic gas infrastructure networks. In other words, although exporting LNG is needed to fill out the cash for state budget, shipping billion tones of LNG abroad for a very long period of time has lowered the competitiveness of domestic industries since all of the value added are gained by the importers.

Malaysia, Qatar, Australia, and Russia nowadays are all starting to increase their market share in LNG export. With its huge gas reserve, Qatar has now produced LNG with lower costs. At the demand side, the full efforts of China and India to make their energy security safe have altered the equation in Asia’s energy market. Indonesia, then, starts to lose its grip on the LNG market when Malaysia completed its third LNG project with the capacity to 23 million tones annually at Bintulu in Borneo island (Asia Times On Line, July/03).

New Paradigm and Challenges
Thanks to the Vice President Yusuf Kalla who pulled the trigger to change. It was under the Vice President leadership that instructed the related ministries in the industry to really start a serious movement for domestic gas utilization. The new paradigm for gas utilization in Indonesia has finally arrived. The Coordinating Minister for Economics Affairs has issued letter No. S-288/M.EKON/12 /2005 on 02 December 2005 which basically to stop all new contracts for gas export, not to extend the on-going contract, and to prioritize the national gas production on domestic industries utilization, especially for power generation.

Responding to the crisis of gas supply, government starts to implement a long awaited project to bring gas from East Kalimantan to Java Island, the populous island where most of the industries are located. Even though many studies have been done in the past, the best alternative to transport gas from East Kalimantan to Java (EKJ) is still unclear. There are three main issues at initial stage, in fact, that require a clear picture and strong political economic decision. They are: (1) the amount of deliverable gas reserve in East Kalimantan; (2) whether to choose pipelines or LNG shipment; and (3) open tender or limited.

Shifting the gear towards domestic gas utilization, however, is not an easy task. While a new vision is clearly in favor to domestic industries, other party might not happy with the decision. Implementing the new paradigm, from time to time, faces the constraints and resistances from different parties. Related agencies have not shown good signals at once. Minister of Energy and Mineral Resource (MEMR) once said that his office has never received the feasibility study of the project (Kompas, 4/10/05). Even, the downstream regulator for oil and gas matters, BPH Migas, needed a clarification about the reserve and also sent a notice to National Committee for Antimonopoly (KPPU) due to the privileges PT. PGN has asked to the government. While the upstream executing agency BP Migas still kept the negotiation of gas sale-purchase agreement in place. To make the situation worse, some also raised the issue that the contract for the EKJ project is most likely to be awarded to the inner circle of the government cronies.
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As a matter of fact, the plan to construct EKJ pipeline project has not been a new game. Year of 2004 witnessed two main events. First is that “Luncheon Discussion: The Study of the East Kalimantan to Java Gas Pipeline Project” was held on January 28 in a luxurious and prestigious hotel in Southern part of Jakarta. Then, on February 26 “The 2nd Workshop for the Study of the East Kalimantan to Java Gas Pipeline Project” was also conducted by MEMR and organized by PT. PGN in a five-star hotel in Central Jakarta. Both of the events were packed out by stakeholders such as government officer, businessman, and association.

Long term planning on natural gas infrastructure development as one of the main alternatives to substitute oil for primary energy use has been prepared for quite long time. PT. PGN (Tbk), the main gas transporter in Indonesia, has actively searched all possibility to finance the project. But, looking for a huge cash to construct the project in money market is definitely not a child's play. Finally, in 2003 Asian Development Bank (ADB) gave a signal to help out in defining financing schemes with a condition, i.e. security of supply.

Then, as an action plan, at the end of 2004 ADB has granted the Government of Indonesia to finance the Technical Assistant of Gas Transportation Project Through Public-Private Partnership (PPP). The grant is conducted separately: (A) by the National Development Planning Agency (Bappenas) to cover the assessment of Energy Mix, Database and Information System on the national energy reserve, and the decision on the transportation mean between pipeline or LNG; and (B) by PT. PGN (Tbk.) to prepare all of possible financing plan which put private participation on higher priority. Part A of the study is now almost complete.

Fortunately, all the differences have finally converged. Minister of MER confirmed his support to EKJ Project (Kompas, 18/11/05). BP Migas has been more cooperative in submitting related data on gas reserve in East Kalimantan area. Related parties and stakeholders then came together and worked hand in hand under a task force team established by the Coordinating Minister of Economic Affairs decree No. KEP-58/M.EKON/10/2005 as a chairman of National Committee for Accelerating Infrastructure Development (KKPPI). Finally, BPH Migas announced to conduct an open tender in the mid of January 2006.

Road Ahead
The implementation of EKJ Project is only one of the short-term programs reflecting the government intention to gas distribution across the nation. While the accomplishment of EKJ project is subject to many aspects, there are also a lot of things to be done at the same time.
Constructing related distribution network, updating policy and regulation framework, securing financial aspects, developing human resources and technology, and improving the awareness of related government officers to utilize gas for the welfare of the people are some of the basic issues to be solved. Also, trading off between exporting gas abroad as one of main sources for state budget and utilizing gas to gain maximum value added for industry domestically would not be an easy choice at all. Finally, disseminating and communicating of the construction plan of diverse infrastructure networks with local and regional government would definitely play a very critical factor for the accomplishment of a new vision and paradigm in gas business.