Jakarta -Indonesia’s LNG imports are expected to be resilient against the coronavirus-led global economic downturn, says Wood Mackenzie. The country’s H2 2020 LNG imports could hit 3.1 million tonnes (Mt), a 1.2 Mt or 63% increase year-on-year.

Despite a slow first quarter due to post-holiday season, Indonesia’s LNG consumption has continued to rise from Q2 2020 at 1.1 Mt and appears to be well-cushioned against the impact of COVID-19. Reduced pipeline gas and low spot prices were likely to have supported Indonesia’s LNG demand. 

The government has also recently introduced a set of regulations aimed at lowering domestic gas price to US$6 per million British thermal unit (mmbtu) for seven key industries and the electricity sector. It is hoped that the measures would improve industrial competitiveness, especially for exports, and create multiplier effects.

Speaking at Wood Mackenzie’s Indonesia Virtual Energy Forum today, principal analyst Lucy Cullen said: “The story of Indonesia is consistent with Asia’s outlook at large. The region’s LNG imports will reach 250 Mt this year, a 2.5% increase compared to last year, and could hit 315 Mt in 2025. By 2040, Asia will account for 40% of global LNG consumption with Indonesia and its Southeast Asian neighbours being key engines of this growth.

“We expect LNG to make up a growing a share of Indonesia’s gas supply mix in the years ahead, offering opportunities for LNG procurement and regasification infrastructure development. But to balance rising consumption, Indonesia also needs to look inwards to address declining production.”

While Tangguh LNG Phase 1 showed strong performance with 117 cargoes delivered last year, the Phase 2 expansion is expected to face delays. In 2019, BP announced a first delay by a year after the

LNG EPC lead-contractor Chiyoda signalled difficulties completing the project on schedule. The project also faced challenges moving labour and materials to the remote location of the plant, while tsunami activity in Eastern Indonesia added to the amount of site preparation work required.

The coronavirus is expected to trigger additional delays with the contractor declaring force majeure in March 2020. Wood Mackenzie expects plant start-up to be delayed to Q2 2022.

According to Wood Mackenzie’s Energy Markets Tool gas’ share of total primary energy demand in Indonesia has been about 12-13% over the past few years.

Cullen said: “Cost of generation and meeting growing electricity demand is key in Indonesia. While coal will always be cheaper, it would be interesting to see in the longer term whether lower gas prices could encourage greater role of gas in the energy mix, and eventually accelerate the country’s energy transition.”