atans1

Indonesia: Bullying instincts arising?

In Energy on 09/07/2010 at 6:32 am

This blog has reported that Indonesia is the new Brazil http://atans1.wordpress.com/2010/03/20/our-neighbour-the-new-brazil/. We should be nice to them but be careful of its bullying tendencies.  Indonesia has form in bullying those it thinks are weak. It succeed in East Timor, West Papua, Acheh and Celebes. It failed against M’sia and S’pore.

It seems to be trying again. Sometime back, our very own superhero MightyMind (or MM Lee in real life) told us,  “We are buying gas from our neighbours; they are thinking of upping the price in spite of the contract”: confirming Indonesian reports that various Indonesian officials have renewed calls for the country to renegotiate a reduction in the volume of gas sold to Singapore, given Indonesia’s growing domestic gas demand.

E.g. in June, Coordinating Economy Minister Hatta Radajasa was quoted as saying, “I have ordered the Energy Ministry and upstream regulator BPMigas to renegotiate the contracts, though we may not achieve what we want. I don’t want to breach the contracts, but we have to try any possibility.”

Energy and Mines Minister Darwin Zahedu Saleh was quoted in mid-June as saying Indonesia will adopt a government-to-government approach, rather than a business-to-business one, to renegotiate the gas supply deals with Singapore.

Indonesian Vice-President Boediono said in June the government will gradually increase its domestic gas price to try to increase investment in the industry and encourage foreign investors to sell their Indonesian gas domestically rather than export it.

But the  government led by the son of MightMind has not gone AWOL. Singapore has already started building a $1.5 billion liquefied natural gas terminal that will starting importing LNG from early-2013, according to MM from Qatar.

The terminal will initially be able to import as much as 490 mscfd of gas, slightly more than the total the three gas pipelines (two from Indonesia and one from Malaya) brings here.

Background info from BT on Indon gas

At present, Sembcorp Gas imports 325 million standard cubic feet daily (mscfd) of natural gas per day from West Natuna in Indonesia under a 22-year deal. This gas goes to major power generators and petrochemical companies here, including Tuas Power, PowerSeraya, ExxonMobil and Ellba Eastern.

From 2011-12, Sembcorp will import an additional 86 million mscfd from Natuna under a second deal that has been struck.

GSPL, a subsidiary of Temasek Holdings, currently imports 350 mscfd of gas daily from Grissik via the Sumatra-Singapore pipeline under a 20-year contract that expires in 2023.

GSPL has recently been in discussions with the production sharing contract holders there, including ConocoPhillips, on a new sales agreement for additional supplies, including for GMR of India’s upcoming Island Power station here.

Both Sembcorp’s and GSPL’s Indonesian piped gas contracts are based on formulas that take into account high sulphur fuel oil prices.

As it is, the Indonesian reports cited a BPMigas official saying the Singapore importers are paying double the amount paid by domestic buyers there.


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  1. [...] MM has been saying Indonesia wants to cancel existing supply agreements. And it’s true Indonesia has beem muttering abt this.  http://atans1.wordpress.com/2010/07/09/indonesia-bullying-instincts-arising/ [...]

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