INCREASING THE SHARE OF NATURAL GAS IN NATIONAL INDUSTRY AND ENERGY CONSUMPTION: INFRASTRUCTURE DEVELOPMENT PLAN?

While petroleum supplies in Indonesia are shrinking, the country is still the largest exporter for LNG in the world and contains of considerable natural gas reserves. It is natural then using more natural gas domestically as an attractive option in pursuing a national policy on energy diversification and industry development. However, the decision is constrained not only by current energy prices, but also the lack of available natural gas infrastructure. This need for additional infrastructure has hindered the economic benefits of energy diversity for quite sometime. This paper stresses the importance of natural gas infrastructure development. The groundwork for which requires developing a formal and legitimate national master plan for natural gas transmission and distribution networks. With the need for energy diversification and expanding the role of natural gas in particular, this paper looks at Java Island as the center of energy demand and national industry, describes alternatives for natural gas transportation and natural gas transportation development projects finance. In addition, it discusses the structure of Indonesia's natural gas industry, regulation and deregulation that has been initiated for oil and gas industries, and potential problems faced by the government in developing the natural gas industry. This paper also sheds light on a set of agendas to be implemented within the coming five years. They include the development of database that is required for the industry to forecast the domestic market capacity and demand for natural gas usage, management of gas fields data, formulation of master plan for national natural gas transmission and distribution networks, financing schemes for natural gas transmission and distribution projects, and redefinition the national energy and natural gas prices policy.