Publications

The Production Sharing Contract (PSC) does not provide details regarding the commercialization of Liquefied Natural Gas (LNG). Additional contractual arrangements are required to be set up along the LNG chain to enable the contractors of PSC to supply, deliver, market and sell LNG to buyers at an agreed delivery point. Such arrangements include gas marketing, financing, EPC, processing, maintenance, transportation and revenue distribution. Indonesia started its LNG export with shipments from the Arun LNG plant in Nanggroe Aceh Darussalam and the Bontang LNG plant in East Kalimantan in 1978 and 1977, respectively. The gas supply to Bontang LNG plant comes from the adjacent gas fields operated by TOTAL E&P INDONESIE and other gas producers in East Kalimantan, while the gas supply to Arun LNG plant comes from the contractor of Arun PSC. Indonesia has adopted a “single seller scheme in the gas business under the old petroleum law (Law No 8 year 1971) in which PT PERTAMINA PERSERO (Pertamina), the Indonesian State Oil and Gas Company, is the sole seller and the contractors are the gas suppliers in support of Pertaminas LNG sales. Such a scheme has been the fundamental characteristic and the long foundation of the LNG business in Indonesia. This solid coordination among the players has successfully minimized competition among gas producers/projects. Indonesia became the largest LNG exporter in the world in the early 2000s, with deliveries of over 27 million tons of LNG per annum (MTPA). The new Petroleum Law (No 22, 2001) allows PSC contractors to become sellers of the states share of natural gas and to enter into gas sale contracts with buyers. This may have an impact on the structure of the gas business in Indonesia, as gas producers would not only have greater roles and responsibilities in managing their gas business, but would also face greater risks along the LNG chain. The challenges lie in how to meet existing and new LNG commitments, as well as how to maintain Indonesias reputation as one of the leading LNG exporters in the world with current exports of over 22 MTPA.