Publications

The emerging natural gas market in Indonesia represents one of the best opportunities available to government to reduce its economic dependency on petroleum products. Over the next five years Indonesia expects to see a huge increase in domestic demand for liquid fuels, escalating its annual import bill by some $2-3 billion. This dramatic increase can be substantially offset by the substitution of oil by natural gas in home markets wherever possible. The utilisation of natural gas for domestic use is still in an early phase, and in particular there is huge potential for penetrating the power generation and general industrial markets.This paper describes the market as viewed by British Gas, after seven years of working as consultant to the state gas company, Perusahaan Umum Gas Negara (PGN). The market is described by sector and geographical location, and estimates of potential market size are reviewed, together with some penetration issues. Competition with subsidised oil products is a key factor as is the economics of fuel substitution to produce the highest returns to the economy.There are a number of institutional issues which must be addressed if these markets are to be penetrated effectively, principally those relating to the gas industry structure aiid coordination, and project financing options.