Indonesia Faces Looming Natural Gas Shortages, Turns to LNG

Jakarta, Indonesia – Indonesia is bracing for potential natural gas shortages between 2025 and 2035, driven by declining output from existing gas fields and limited new discoveries. The country, which relies heavily on natural gas for power generation and industrial processes, is increasingly looking to liquefied natural gas (LNG) as a key solution to mitigate the impending supply gap.

The Approaching Gas Supply Deficit

State-owned gas company PT Perusahaan Gas Negara Tbk (PGN) has raised concerns about the projected shortages, particularly in Sumatra, and Java. Declining production from existing fields, coupled with a lack of significant new gas discoveries, is the primary driver of this looming crisis. Production is experiencing a “natural decline,” meaning existing fields are yielding less gas over time, and this decline isn’t being offset by new sources.

LNG as a Bridging Solution

To address the anticipated shortfall, Indonesia is focusing on increasing its utilization of LNG. LNG will be regasified to meet the demands of critical sectors, including electricity generation and the fertilizer industry. PT PGN has identified three key sources for LNG supply: the Tangguh LNG plant, the Bontang LNG plant, and the Donggi Senoro LNG plant. The company is actively seeking allocations from these facilities, requesting support from SKK Migas and the Ministry of Energy and Mineral Resources (ESDM).

Gas in Indonesia’s Energy Mix

Natural gas currently plays a significant role in Indonesia’s energy landscape. In 2023, it contributed 16.28% to the country’s energy mix, ranking third after coal (40.46%) and oil (30.18%). Gas-fired power generation accounted for 17.7% of Indonesia’s total electricity generation in the same year, with installed capacity increasing by 26% between 2018 and 2023.

Energy Transition and Future Demand

Indonesia has committed to achieving net-zero emissions by 2060 or sooner, driving a shift towards renewable energy sources. However, natural gas is expected to remain a crucial part of the energy mix during this transition. The government plans to increase gas-fired electricity generation as it phases out coal-fired power plants, leading to a projected increase in gas demand. PLN, the state-owned electricity company, anticipates that gas will contribute 21% (15 GW of capacity) to the 71 GW of additional electricity capacity planned by 2034.

Challenges to LNG Implementation

While LNG offers a viable solution, its implementation faces challenges. These challenges were not detailed in the available sources.

Indonesia’s Natural Gas Market Size

The Indonesia natural gas market was valued at 64 billion cubic meters in 2023.