Development of the Domestic LNG Value Chain and Infrastructure in Indonesia

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James Brown

Regional LNG and Gas Consulting Manager

DNVGL – Global network through local support

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Existing and forecast LNG fuelled ships and bunkering infrastructure

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50 LNG fuelled ships in operations – 50 more ordered

Existing and forecast of LNG bunkering infrastructure in Japan, Korea and South East Asia

� Korea

– KOGAS is supplying LNG bunkers to Asia’s first LNG

powered passenger ship, Econuri, at Incheon Port.

KOGAS began a trial run on March 7, supplying the LNG

bunkers from Songdo Port in Pohang.

– KOGAS also studied potential locations at Busan and

Pyeontaek. KOGAS is also in discussion with Japan Gas

Association to supply LNG as fuel to vessels operating

on the South Korea-Japan ferry route

� Japan

LNG bunkering facilities in Korea

Busan

Incheon

Pyeongtaek

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� Japan

– Japan's NYK is to build the country's 'first' tug featuring

a dual-fuel engine that can run on either LNG or HFO

built in Japan. Tokyo Gas Co will supply the LNG. No site

has been announced for the LNG bunkering facilities

� Singapore

– Singapore has a strong interest on providing LNG as

fuel. A number of studies have been completed such as

LNG bunkering feasibility studies, LNG bunkering

operational procedures and standards and also, an MOU

was signed between MPA and Port of Antwerp and

Zeebrugge to harmonise LNG bunkering standards

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Singapore

Selection of LNG Studies and Joint Industry Projects

Various Small Scale KNG studies for

S Korea, Middle East & Australia

Opportunities for LNG in the

Philippines and Vietnam

Singapore LNG Bunkering JIP

Cutting edge project investigating

small scale LNG based distributed

power 2012

2013

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power

Small scale LNG market study and

opportunity identification

Assessment of LNG logistics chain

in Indonesia

JIP – Feasibility of the SEA market

for LNG shipping and distribution

Opportunity assessment of the

Southeast Asian market for LNG

shipping and distribution2010

2011

Results of JIP identifying that LNG could increasingly be used to serve power

needs in Eastern Indonesia

Sources: DNV

Figure 1: List of some of the JIP members

2012

Increased deployment of small scale LNG in Indonesia will reduce government diesel subsidies

High cost of electricity

generation in Eastern

Indonesia

Drivers for small scale LNG in Indonesia include:

� Geographical:

� Dispersed islands

� No extensive gas pipeline network

� Political:

� Strong government-led efforts to increase the portion of gas for domestic use

� Heightened government awareness on the need for using LNG to transport gas

� Government expected to reduce local pollution

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PLN’s sales revenues and costs of supply by region in 2005 (in

US cents)

Sources: Interviews, World Bank (2005)

� Government expected to reduce local pollution and CO2 emissions

� Market:

� High price of diesel compared with LNG

� Indonesian fuel subsidies are increasingly costly as electricity demand grows

� Need for distributed power generation

� Technical:

� Proven technical feasibility

� Important facilities such as FSRU soon to be online

DNVGL performed cost-benefit analyses on two LNG supply chain types in Eastern Indonesia

Liquefaction plant

Small-scale LNG ship

(10,000 – 12,000 m3)

LNG storage &

regasification (Satellite

plant)

LNG truckSmall-scale LNG terminal

(Onshore or Offshore)

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Power Plant

FLNGNG pipeline

Small-scale LNG terminal

(Onshore or Offshore)

Small-scale LNG ship

(10,000 – 12,000 m3)

Supply chain options have no one size fits all – risks in each scenario varies and solutions have to

be customized to each locality

2011 study identified 4 potential small scale LNG milk runs in Eastern Indonesia

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Eight Small Scale LNG Import Terminals were identified in 2011 for development

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What is preventing the Domestic Small Scale LNG market from developing?

Technology

Economics

Infrastructure

Finance

Regulation

LNG Sellers

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LNG

Buyers

Regulation

Summary: Opportunities still exist to overcome challenges and succeed with Domestic LNG in Indonesia

� Small scale and domestic LNG has huge potential in Indonesia

� Substituting diesel or HFO at suitable volumes will justify the investment

because the (increasing) price differential exceeds the transport costs

� Many such opportunities exist in Indonesia, driven by geographical, political,

economic and technical factors

� Captive power in particular represents a good opportunity

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� Captive power in particular represents a good opportunity

� Eastern Indonesia has many energy-intensive, isolated mines currently using

diesel or HFO

� Eastern Indonesia has suitable supplies of LNG planned and proposed

� ….but only if we can ‘open valves’ that are preventing infrastructure

development

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Terima Kasih

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SAFER, SMARTER, GREENER

www.dnvgl.com

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James Brown

James.Brown@dnvgl.com

+65 9725 2704