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Writer's pictureGeni Buana Nusantara

The Role of Natural Gas in Indonesia’s Energy Transition: Bridge Fuel or Long-Term Solution?

Updated: 4 days ago



Natural gas, especially LNG (Liquefied Natural Gas), plays an important role in Indonesia's energy transition as a bridge fuel between fossil and renewable energy. With lower carbon emissions than coal and oil, natural gas helps mitigate the effects of climate change while meeting growing energy needs. Cooled to extreme temperatures of -162°C to reduce its volume by 600 times, LNG facilitates energy storage and distribution, and plays a role in energy diversification and delivery to remote areas. LNG also offers up to 25% reduction in CO₂ emissions, up to 90% reduction in NOₓ emissions, and no emissions of sulfur or other harmful particles. While LNG is a practical short-term solution, Indonesia needs to reduce reliance on fossil fuels to achieve net zero emissions by increasing the use of renewable energy such as wind, solar and hydrogen. In this case, natural gas serves more as a transitional fuel towards cleaner and more sustainable energy. LNG (Liquefied Natural Gas) refers to the regulation of the Decree of the Minister of Energy and Mineral Resources Number 13 K/13 / MEM / 2020 concerning the Assignment of the Implementation of the Supply and Development of Liquefied Natural Gas (LNG) Infrastructure, as well as the Conversion of the Use of Fuel Oil with Liquefied Natural Gas (LNG) in Electricity Supply. The regulation serves to regulate strategic steps in supporting the utilization of LNG in the power generation sector in Indonesia.


Natural gas is playing an increasingly important role in the energy transition, thanks to its ease of transportation and storage, and lower carbon emissions than other fossil fuels. This clean energy is predicted to grow rapidly, especially in Asia Pacific, including Indonesia, which is committed to reducing greenhouse gas emissions by 29% by 2030, and up to 41% with international support. Indonesia's energy sector also targets to reduce CO₂ emissions by 398 million tons by 2030, through the development of renewable energy and the application of clean energy technologies. Gas used to be mostly exported, but now more than 60% of Indonesia's gas production is used to meet domestic needs. In the National Energy General Plan, natural gas is projected to reach 24% of the national energy mix by 2050. The industrial, power and fertilizer sectors are the largest consumers of domestic gas, with significant contributions from LNG and pipeline exports. With total gas consumption continuing to rise, natural gas plays a crucial role in supporting the transition to a cleaner and more sustainable energy future.

 

Table 1. Indonesia's Energy Balance 2022


The reality is that fossil fuel use continues to show a significant growth trend. In fact, according to the International Monetary Fund (IMF), global fossil fuel subsidies reached a record high of US$7 trillion in 2022, an 18% increase compared to the previous year. In Indonesia, natural gas production, including LNG and LPG, in 2022 was recorded at 364 million barrels of oil equivalent (BOE), or about 11.9% of total domestic energy production. This figure is still much smaller than coal production, which reached 2,3 billion barrels of oil equivalent, or 61% of total domestic energy production. LNG, a derivative of natural gas, only contributed 938 thousand barrels of oil equivalent, or around 0,03% of total domestic energy utilization.


Liquefied natural gas (LNG) infrastructure and distribution systems involve a series of facilities that enable the production, storage and distribution of LNG from production sources to end consumers. This infrastructure includes several key components:

  1. LNG Generation and Processing Facilities: Natural gas extracted from its source is processed to remove impurities, such as water, carbon dioxide, and sulfur.

  2. LNG Terminals: LNG terminals are important facilities for storing and loading LNG onto tankers. Here, LNG in liquid form is stored in specialized tanks, before being transferred to ships that will transport it to other locations. Terminals can also have facilities for regasification, where LNG that arrives in liquid form is converted back into gas for distribution through pipelines.

  3. LNG Carrier Vessels: LNG ships are the primary means of transportation for moving LNG between countries or regions. These vessels are equipped with cryogenic storage tanks that keep the temperature of the LNG very low during the journey.

  4. Regasification Facility: Once the LNG reaches its destination, it must be converted back into natural gas for use. This process happens at a regasification facility, which converts the LNG back into gas by heating, and the gas is then distributed through pipelines.

  5. Pipelines: After regasification, the natural gas is transported to consumers through a network of gas pipelines that connect different regions, whether for industry, power generation, or household consumers. This pipeline infrastructure can be onshore or underwater, depending on location and needs.

  6. LNG Storage and Filling Stations: In addition to LNG terminals, there are also LNG storage facilities and filling stations that allow distribution in liquid or gaseous form to consumers in smaller quantities, for example for LNG-fueled vehicles or for industries that require a limited supply of gas.

This infrastructure allows LNG to be a flexible solution for energy distribution, both in regions isolated from pipeline gas networks, as well as in countries that require energy supply on a large scale. With advances in technology, LNG distribution is increasingly efficient, supporting the diversification of energy sources and helping to reduce dependence on more polluting fossil fuels such as coal.


The Indonesian government has shown a positive attitude towards the use of natural gas as part of the energy transition, given its cleaner role compared to coal and oil. Natural gas is considered a short-term solution that can reduce carbon emissions during the transition to more environmentally friendly renewable energy sources. In many policies, governments support the development of natural gas infrastructure, including LNG processing and distribution facilities, to ensure a stable energy supply. In Indonesia, for example, natural gas is prioritized to meet domestic needs, with more than 60% of its production allocated to the domestic market. The government is also committed to increasing the share of gas in the national energy mix, which is targeted to reach 24% by 2050. Nonetheless, attention is being paid to the development of renewable energy, with the expectation that natural gas will serve as a bridge to a more sustainable energy system. In the long term, LNG has promising prospects as a transitional solution to cleaner energy, although its role will shift as renewable energy becomes more prevalent. Demand for LNG is expected to continue to rise, especially in Asia and Europe, as decarbonization efforts and coal replacement in power plants continue. Increasingly sophisticated storage and regasification technologies allow LNG to be more efficient and integrated with renewable energy sources, such as back-up when solar or wind generation is not producing enough power. While LNG remains a carbon-emitting fossil fuel and faces challenges such as price fluctuations and competition with hydrogen, its role remains important in supporting the energy transition and achieving global net zero emission targets.


Hydrogen and LNG have great potential as future energy sources that can reduce dependence on fossil fuels and support the transition to cleaner energy. Hydrogen, as a very clean fuel, produces only water vapor when used with no carbon emissions or other air pollution, making it a key alternative to replace fossil fuels in sectors such as transportation, industry, and power generation. Hydrogen can be produced from a variety of sources, including water, biomass and natural gas, and is easily stored in liquid or compressed form, which facilitates distribution, especially to areas not covered by pipelines. On the other hand, LNG also has advantages as a power generation fuel with lower carbon emissions, supporting energy diversification and reducing environmental impacts. LNG has high supply reliability as it can be stored for long periods of time and distributed to remote areas, making it a practical solution to global energy needs. With technological advances and greater investment in infrastructure, both LNG and hydrogen have the potential to replace natural gas and other fossil fuels, supporting global energy decarbonization and sustainability.



Company provider:

PT Badak Natural Gas Liquefaction (Badak LNG) is a company focused on the production and processing of Liquefied Natural Gas (LNG) in Indonesia. Located in Bontang, East Kalimantan, Badak LNG operates as one of the largest LNG facilities in Asia. The company processes natural gas from oil and gas blocks in the Indonesian region to be converted into LNG, which is then distributed to domestic and international markets.  The company has 8 process trains (A - H) capable of producing 22,5 Mtpa of LNG (million metric tons of LNG per year), and is one of the largest contributors to foreign exchange for the city of Bontang and Indonesia assuming the average train capacity at the Bontang Gas Plant reaches 400 mmscfd.  Along with the development of the global energy industry, Badak LNG continues to innovate to improve operational efficiency and ensure the sustainability of environmentally friendly energy supply. Total energy usage, gas energy usage for the production process, and gas energy usage for supporting facilities, at PT Badak NGL during the period 2013 - 2017 can be seen in table 2 below:

Table 2. Energy Usage and Efficiency Profile


Table 3. Status of air emissions generated


In supporting the development of LNG in Indonesia, the main source of energy at the plant is also expected to come from cleaner energy sources with PLN as a supplier of clean electricity with a capacity of 160 Mega Volt Ampere (MVA). President Director of PT PLN, Darmawan Prasodjo said that PLN is ready to continue collaborating in providing electricity for businesses. Later 11 of the 15 planned plants that will supply the East Kalimantan system are renewable energy-based plants. Of course, the use of renewable energy is in line with the government's campaign to reduce carbon emissions towards net zero emissions (NZE) in 2060. The plan is that PLN will carry out electricity connection in stages for PT Badak LNG. In Phase 1, PLN will supply 5 Megawatts (MW) in 2024. Then, in Phase 2, PLN will supply 160 MW in 2028, the same as the previous summit treatment. Based on available information, the project may have started running, but it is not yet fully operational, especially for renewable energy-based plants. PLN is targeting Phase 2 in 2028, meaning that most of the renewable energy plants will only start operating around that time. To date, the summit project may have only reached the advanced planning stage or early implementation for some plants.


Based on PT Badak NGL data, the Bontang gas refinery currently has a total of 3 trains that can process gas. 2 of them are Train G and Train H which have an average capacity of 400 mmscfd. Meanwhile, the other 1 train, Train E, is intended as a train that is ready to operate if there is additional feed gas to be produced at the Bontang Gas Plant in the East Kalimantan region. Assuming the average train capacity at the Bontang Gas Plant reaches 400 mmscfd. Eventually, if all four trains are fully operational, the total capacity of the plant will reach 1.600 mmscfd. Currently, the total capacity of the Bontang Gas Plant is 800 mmscfd, consisting of two active trains. However, the two trains have not maximized their production capacity due to the limited gas supply entering the refinery. The total capacity is now 800 (mmscfd), but 600 (mmscfd) is used.

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