Jakarta (Platts)--5Jul2012/506 am EDT/906 GMT

The Indonesian government is considering putting in place a moratorium on the export of natural gas, via pipelines or as LNG, in an effort to meet domestic demand, a senior government official said Wednesday.

But the moratorium will only apply to new contracts or contracts that have expired and are due for renewal, and not to existing contracts, Evita Legowo, oil and gas director general at the Energy and Mines Ministry, said.

"We will do our best to apply a moratorium on gas exports," Legowo said, but added that Indonesia must also ensure that in doing so, it does not make it economically unviable for companies to develop fields in the country.

Legowo's comments were made following a call from some parliament members to stop gas exports.

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Indonesia's 2001 oil and gas law includes a domestic market obligation clause, which requires gas producers to allocate 25% of their production to the domestic market.

Indonesia currently has at least four giant gas projects in various stages of planning and development. These include the 6 million mt/year Masela floating LNG project being developed by Shell and Inpex; Chevron's Makassar Straits project with estimated resources of 2.3 Tcf; Pertamina's East Natuna gas project with estimated resources of 222 Tcf; and BP's plan to add a third 3.8 million mt/year liquefaction train to the Tangguh LNG project.

Indonesia, once a top LNG supplier to the world, has for the last few years been struggling with an appropriate policy that would strike the right balance between exports and domestic allocation.

While the country may like to keep as much gas for domestic use as possible, the reality is that it needs the revenue that is generated from LNG exports. Though the government has gradually been raising domestic gas prices, they are still a far cry from international levels.

According to a study by state oil company Pertamina, Indonesia's gas demand is expected to reach 5.5 Bcf/d in 2020, compared with 2.6 Bcf/d currently.

The proportion of gas in the country's total energy mix, meanwhile, will rise to 30% in 2025, from 20.1% in 2010, as the government looks to cut its oil dependency from 49.7% in 2010 to 20% in 2025, according to a presentation made late June by Djohardi A. Kusumah, vice president for commercial and business development at Pertamina Gas.

Most of the gas demand growth will come from the power and fertilizer sectors, and will be concentrated in the industrial island of Java, Kusumah said.

Though the country has a few gas projects in the pipeline, lack of sufficient infrastructure could prevent this gas from reaching the demand centers, Kusumah said, adding that Pertamina has taken it upon itself to develop this infrastructure, which includes pipelines, compressed natural gas stations and LNG receiving terminals.

--Anita Nugraha, newsdesk@platts.com
--Mriganka Jaipuriyar, mriganka@platts.com
--Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

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