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CHAPTER 11

ASSESSMENT OF GAS SUPPLY SYSTEM

11.1 INTRODUCTION

PT PLN (Persero) has planned to build PLTGU/PLTU Madura 400 MW Project


(the Project) as a gas-fired PLTGU 1. It was originally listed in RUPTL 2016-
2025 and again in RUPTL 2017-2026 as PLTU/PLTGU Madura 400 MW.
However, based on information from PLN, it was understood that the project
would be developed as a PLTGU instead of PLTU.

Being a gas-fired combined cycle, the Project would be very flexible in terms of
operation duty cycle. It may take the role as base-load, load-following or
peaking generation. It all depends on the economic merit order of the Project
when completed, and the merit order itself would be determined by the
variable cost, which is largely fuel cost. If the gas price is very high, the Project
would be more economical if running as peaking generation with low capacity
factor (CF) of about 25% or lower. On the other hand, if the gas price is low, it
may run as base-load generation with CF of 70% or higher. In between the two
roles, the project may run as a load follower with CF between 40% and 60%.

Less expensive gas price is expected when gas supply is sourced from a local
gas field, and the gas is transmitted from the gas field to the plant gate through
a short pipe line (i.e. low toll fee). However, if a local gas supply is not
available, gas must be transported from distant sources in the form of LNG. In
the past, LNG price is perceived more expensive than the price of pipe gas due
to indexation of LNG price to high oil price at that time in the past. However, as
the oil price has been declining during 2015 and 2016, LNG price has also been
declining to an unprecedented level in Indonesia.

Assessment of gas supply plan is necessary in this feasibility report as the


feasibility of PLTGU Madura Project in Sumenep would be largely determined
by the availability of gas supply. The assessment would start with a brief
review of the government policy and regulations on utilization of natural gas
1 PLTU is Indonesian term for steam power plant, and PLTGU is for gas turbine combined cycle.
for power generation. It is followed by description of the current gas supply
situation for the major power plants in East Java (Gresik and Grati), and gas
supply potentials for PLTGU Madura, including LNG supply system.
11.2 GOVERNMENT POLICY ON GAS USAGE FOR POWER GENERATION
11.2.1 Utilization of Natural Gas for Domestic Market2

Domestic Market Obligation (DMO) is first stipulated in the Oil and Gas Law
No. 22 of 2001. Clause 22 of the law states that a Contractor is obliged to submit
25% maximum of its oil and gas production, of its share, to meet domestic
demand3. Judicial review by the Constitution Court (Mahkamah Konstitusi) in
2004 rectified this Law, in which, among others, changed the word maximum to
minimum.

Then for the first time in the history of Indonesia, domestic gas consumption
exceeded gas export in 2013. The government intended to maintain this
condition, so that in 2015 the government set the target of domestic
consumption to 59%, and expected to increase to 64% by 2019. This target in
2019 seems rather optimistic, considering the existing contracts would show a
decrease of the portion of domestic consumption in conjunction with the
completion of Tangguh Train 3, which is 60% is for export.

The increase of DMO target needs to be supported by development of national


gas infrastructure, such as FSRU4, LNG receiving terminals, and gas pipes, so
that gas from large fields in Kalimantan and Eastern Indonesia can be
transported to the largest gas consumers located in Java and Sumatra.

At present, gas allocation policy of the government would prioritize the


domestic market. Larger gas reserves would be utilized for domestic market
and export, but smaller gas reserves would be developed only for domestic
market. DMO policy requires at least 25% of the contractors portion allocated
for domestic market. Besides that, DMO for Tangguh Train 3 reaches to 40% 5.
11.2.2 Utilization of Gas for Power Generation

2 Rencana Strategis 2015-2019, Kementerian ESDM, Direktorat Jenderal Migas.


3 Undang Undang No. 22 Tahun 2001 tentang Minyak dan Gas Bumi.
4 FSRU: Floating Storage and Regasification Unit.
5British Petroleum Regional President Asia Pacific,Christina Verchere, (2014).
In order to enhance utilization of natural gas for power generation, and to
ensure the supply of natural gas at competitive and reasonable prices, the
ministry of ESDM6 earlier this year issued a regulation No. 11 of 2017 regarding
utilization of natural gas for power generation by PLN and private power
producers connected to PLNs grid/IPP. This regulation is the first of a kind
and is expected to give clarity on the natural gas supply and pricing for power
generation in Indonesia. A brief summary of the regulation relevant to PLTGU
Madura project is as follows7.

On Allocation of Gas:

- Allocation and utilization of gas for power generation is set as endeavor to


meeting domestic electricity supply (clause 3, article 1),
- Allocation of gas for power generation can be directly made to PLN or Private PP
(3.2);
- Apart from allocation, PLN and Private PP can purchase gas from a gas trading
company that holds allocation, so long as the company provides gas facilities and
infrastructure (3.3).

On the Term of Gas Supply Agreement (GSA):

- PLN and IPP must ensure that allocation/supply of gas is available for the whole
life of the power plant of 20 years (4.1);
- Allocation/supply of gas is prioritized to be acquired from a Contractor (4.2);
- The Contractor is obliged to ensure the implementation of gas supply agreement
(GSA) as stipulated in the term of the GSA (4.3);
- In the event the allocation/supply from a Contractor is shorter than 20 years, PLN
and Private PP can fill the shortage of allocation/supply from another source (4.4).

On Gas Pricing:

- The Minister of ESDM governs the price of gas for power generation (6.1);
- The gas price is governed by taking into consideration economic of gas field, price
of gas in domestic and international markets, purchasing power of domestic
consumers, and added value of domestic gas utilization (6.2);

6 ESDM is Energi dan Sumberdaya Mineral, or Energy and Mineral Resources.


7 For concise writing, from hereafter natural gas will be referred to as gas.
- In the event the downstream gas infrastructure is ready on the power plant side,
gas price is applicable at the plant gate (8.1);
- The gas price at the plant gate consists of upstream gas price plus transmission
cost (8.2);
- In the event the delivery point is not the plant gate, the Contractor is obliged to
transmit the gas up to the delivery point, and PLN/Private PP is obliged to have
gas transmission agreement from the delivery point to the plant gate with the pipe
owner (8.3);
- In the event the downstream gas infrastructure at the power plant is not ready, the
applicable price is the upstream gas price (8.4);
- PLN/Private PP can purchase gas at a maximum price of 11.5% ICP per mmbtu
for power plants not located at wellhead (9.1);
- In the event the price is higher than 11.5% ICP, PLN/Private PP can use LNG (9.2);
- LNG price for power generation is calculated on basis of field economic and
agreed formula (9.3);
- In the event the price of domestic LNG is higher than 11.5% ICP, PLN/Private PP
can import LNG, so long as the price of imported LNG is lower than 11.5% ICP at
the regasification terminal of the buyer (landed price) (9.4);
- In the event the price of imported LNG is higher than 11.5% ICP, then
PLN/Private PP can purchase pipe gas at a price higher than 11.5% ICP, or
purchase LNG from domestic sources at a price higher than 11.5% ICP (9.5).

On Tariff for Gas Transmission/Transportation

- Transmission of gas can be through pipe or non-pipe (10.1);


- Transmission of gas through non-pipe can be through ships, barges, trucks or
other means (10.2);
- Tariff of gas transmission through pipe is regulated by law and regulations (11.1);
- Tariff of gas transmission through non-pipe is calculated on the basis of economic
values and competitive market (11.2).

On Guarantee:

- The holder of gas trading license must provide guarantee on security of gas supply
and security of gas transmission (12.1);
- PLN/Private PP as gas buyer must provide assurance on timely payment (12.2).

On Gas Supply Agreement (GSA)


- PLN/Private PP as buyer signs GSA with a Contractor or Gas Trading Company
as seller (13.1);
- GSA shall contain at least source of supply, volume & specification, price, term of
contract, price review, mechanism of gas transmission, and rights & responsibility
of buyer and seller (13.2).

As the ministerial regulation of ESDM No. 11/2017 comes into force, it needs to
be followed for PLTGU Madura project.

11.3 POTENTIAL GAS SUPPLY

Indonesia is endowed with sizable natural gas reserves to meet domestic


demand as well as export market. Approximately 151,33 TSCF 8 of gas reserve is
available with 97,99 TSCF proven and 53,34 TSCF potential reserve as of
January 2015. Larger gas reserves are situated in Kalimantan (Badak/Bontang),
West Natuna, Eastern Indonesia (Donggi-Senoro), and Tangguh. While smaller
gas reserves are scattered in Sumatra, Java, Kalimantan, Sulawesi and Eastern
Indonesia.

According to Indonesian natural gas balance 2015-2030 as it is represented


inFigure 11 -1, the forecast gas demand would reach 8,249 bbtud in 2025. The
utilization of gas is allocated to some sectors, they are transportation, industry,
electricity, fertilizer, lifting and own used. Meanwhile, the gas demand for
power sector alone which have been committed and contracted is 2,081
mmscfd, which did not include potential demand.

8 Handbook of Energy and Economic Statistics of Indonesia 2016, Pusdatin Kementerian ESDM
Figure 11-1 Indonesia Gas Balance 2015-2030

Discussing about gas supply for PLTGU Madura in Tanjung Village, Sumenep
Regency, there are three options of gas supply which can be utilized, they are
new gas supply from Energi Mineral Langgeng (EML) as the main option,
MAX gas field, East Java Gas Pipe (EJGP) from existing gas pipe, and LNG. The
pros and cons of each alternative will be discussed below clearly.
11.3.1 New Gas Field of Energi Mineral Langgeng (EML)

Gas field from EML is located in Tanjung Village, Sumenep Regency, so is


PLTGU Madura. The size of block EML reaches to 4,567.34 sq km 9 which consist
of:

(i) Area I (Northern Part): 1,872.45 Sq km

(ii) Area II (Northen Part): 2,694.87 Sq km

The operation area is onshore and offshore, in the Northeast Java Basin lies on
the South Madura Island and North-eastern part of Java Island.

9 Executive summary.www.eml.co.id.web.12 Mei 2017


As the positive sides of utilizing EML gas field can be reviewed from the point
of location and the cost of constructing infrastructure.

The location of EML is close to the power plant, it only takes 1 km from gas well
to PLTGU Madura. More clearly, it can be seen in Figure 11 -2.

Figure 11-2 Location of EML Gas Field

Due to its imminent location to power plant, the cost of supplying gas can be
economized. PLN only needs to construct 1 km of gas pipe to supply the power
plant. Of course, this value is considered more economical than constructing
other gas pipe to gas well around.

On the other side, there are many shortcomings of using this gas field. The total
reserve of EML is still unknown. At the time of writing this report, final
agreement between PLN and EML has not been clarified. EML has not achieved
an exploration stage. The capacity of this well has not been known too, so has
the sustainability of gas supply to PLTGU Madura. Moreover, the information
of either POD or COD of this well is still unknown. Thus, the punctuality of gas
utilization towards the COD of power plant is not guaranteed.

Therefore, there must be certainty if gas supply from EML is applied due to the
lack of clarification on total gas reserves and gas commercialization for the
utilization of PLTGU Madura. However, this well has a very high added value
compared to other gas wells because it has a very close proximity to the location
of the plant.
11.3.2 MAX gas field

This potential of gas supply, MAX, is located in the southern part of Madura
Island as illustrated in Figure 11 -3. PLN has engaged in discussion with
related gas developer of MAX. Table 11 -1 gives the detailed capacity of MAX
based on the information provided by PLNs Gas and Oil Unit (SGBM).

Table 11-1 New Potential Gas for Madura


Suppliers 2017 2018 2019 2020 2021 2022 2023 2024 2025
Max Fields HCML 40 40 40 40 40 40 40
Total Amount of
Potential Gas Supply 0 0 40 40 40 40 40 40 40

As seen in Table 11 -1, the potential gas supply from MAX will be around
40 mmscfd. At the time of writing this report, MAX is still in the exploration
stage. The plan to propose POD to SKK Migas will be made after the buyer (i.e.
PLN) has demonstrated certainty to buy the gas which is written in a LOI
(Letter of Intent).

As been decided earlier in this feasibility report, PLTGU Madura project will be
sited at Tanjung village, Saronggi district, Sumenep regency. With the power
plant project located in Sumenep, gas supply from MAX will need to be
transported to the closest shore first, which is Sampang coast, at a distance of
about 15 km. Then it will run approximately 70 km to the east to arrive at the
PLTGU Madura Project site in Sumenep. To sum up, over 95 km of new gas
pipeline will need to be constructed to supply the gas from MAX to PLTGU
Madura Project.
Figure 11-3 PSC in Madura Strait 10

Referring to the consultation with MAX, the contingent resources for Madura
are divided into two groups: 2C (which will produce 44,045 mmscf) and 3C+2C
(which will produce 111,985 mmsfc). The prediction of gas production by MAX
will be between 28-40 mmscfd with production period of 10-15 years. Currently
there are three drilling fields in MAX. MAX-1 was drilled in 2012 and it
discovered gas of around 28.22 mmscfd. Then, MAX-3 was drilled in December
2013, but due to the absence of significant gas, it was plugged and abandoned.
Another well will be developed in Q1 2018. In addition, MAX field will be
preceded by Mobile Offshore Processing Unit Facility (MOPU), which will be
started in 2019. Table 11 -2describes the rate of MAX gas supply for pool well
count 2.

Table 11-2 Gas Rate MCF/Day for Pool Well 2


Pool Well Volume
Year Rate Mcf/day
Count MMCF
2020 2 14,016 38,400
2021 2 14,016 38,400
2022 2 14,054 38,400
2023 2 14,016 38,400

10Samudra Energy Madura Strait PSC


Pool Well Volume
Year Rate Mcf/day
Count MMCF
2024 2 14,016 38,400
2025 2 14,016 38,400
2026 2 10,543 28,805
2027 2 7,358 20,159
2028 2 5,151 14,112
2029 2 3,610 9,890
2030 2 1,190 5,588

Gas supply allocation plans of MAX has 3 alternative markets:

(i) Joining the gas pipeline from MAX to Sampang: the market will be reserved for
PLTGU Madura only if the agreement have been achieved;
(ii) Connecting to EJGP with a distance of approximately 47 km: the gas market will
be Surabaya, Gresik, Sidoarjo through Porong.
(iii) Constructing pipeline from MAX to FPSO facility in BD well: the market will be
Pasuruan and Grati through Pertagas pipeline.

If option (i) is taken, i.e PLTGU Madura will be supplied from MAX, the other
options (ii) and (iii) will not be developed.

It is estimated that when PLTGU Madura 400-500 MW Net project is running as


a load follower, it will consume the natural gas about 43,33 bbtud or 43,33
mmscfd11 for 1 on 1 configuration with the parameters as follows:

(i) Capacity Factor : 60%


(ii) Net Plant Heat Rate : 1,450 kcal/kWh
(iii) Net Efficiency : 59.3%
(iv) Net Plant Output : 500 MW

As the stated before, the MAX production are 28-40 mmscfd with the
production period 10-15 years. Based on the clarification with MAX, if the gas is
utilized for 28 mmscfd, then the production period will be 15 years and if the
gas usage consumes 40 mmscfd, the production period will be only 10 years.
Hereinafter, apparently gas supply from MAX will not be sufficient to satisfy
the gas demand of PLTGU Madura which based on the ministerial regulation
no.11 of 2017 that PLN must ensure the allocation of gas for the whole life of the

11 Assumed Natural Gas 100% Methane at Standard Condition 1 atm pressure and 15 degree centigrade
temperature
power plant of 20 years. Therefore, MAX alone cannot guarantee the adequacy
of gas supply for PLTGU Madura project.

In accordance with the detailed explanation above, it can be concluded that


using gas well from MAX has an advantage in terms of timing of COD gas
wells towards the power plant, because MAX already has a clear clarification in
its POD, if it has a certainty of buyer However, the MAX gas well has some
drawbacks, they are:

(i) Location

The max well has a considerable distance from the plant site. In total
calculation, it takes more than 95 km which is needed to construct gas pipe.

(ii) Total Reserves and Supplies

Gas supply from MAX field is not sufficient to supply gas to PLTGU
Madura. As described above, this plant requires 43.33 bbtud. Consequently,
MAX production utilization period lasts only 10 years. Meanwhile,
allocation of gas for whole life power plant must attain to 20 years.

(iii) Cost

The gas pipeline construction which needs approximately 95 km will cost a


lot of funds. In addition, both constructing gas pipelines in the upstream to
Sampang shore and constructing gas pipeline on downstream in Madura
Island are needed, until it reaches the plant site. There will be a lot of
energy, funds, and time spent in developing this gas field

11.4 EXISTING GAS SUPPLY


Discussing about the allocation of gas for PLTGU Madura is started from the
existing pipe gas around Madura coming from Pertagas East Java Gas Pipeline
(EJGP). The gas of Pertagass EJGP is collected through some sources. This pipe
gas flows into Onshore Receiving Facility (ORF) in Porong. As shown inFigure
11 -4, the route of EJGP is started from Kangean.

Figure 11-4 Location of Gas Wells from Kangean

Figure 11 -4 shows that the EJGP is collected to ORF Porong. The gas will be
allocated to some power plants in Java, such as PT PJBs Gresik power plant
and other industries like PGN and Petrokimia Gresik Factory 12.

In reference to RUPTL 2016-2025, the forecast gas supply for Java-Bali power
plants is summarized in Table 11 -3. It shows the allocation of natural gas to
some power plants in East Java, such as PLTGU Gresik and PLTGU Grati,
which will be supplied by KEI (Kangean Energy Indonesia). KEI is estimated in
RUPTL PLN 2017-2026 to have potentials for supplying gas to PLTGU Madura
as well, apart from supplying the power plants and other industrial sectors in
Java.

Table 11-3 Estimation of Gas Supply for Jawa Bali Power Plants

12 Gas Transportation. Pipa Transmissi Jawa Timur. Pertagas-Pertamina. Web. 10 Agustus 2014
There is another gas pipeline running from Porong to Grati. The capacity of
Porong Grati pipeline of 56 kilometers is 122 mmscfd 13. It will supply gas
demand of PLTGU Grati which needs 25 mmscfd, and the rest is supplied to
industries and households around Pasuruan.

Porong Grati pipeline also will get additional gas supply from Santos for
25 mmscfd until 2019, Husky Energy for 40 mmscfd, and KEI for 100 mmscfd
started from 2021 to 202414. Porong Grati pipeline also supplies gas to Gresik
power plant.

13Pertagas East Java Transmission-Pertagas.Pertamina.Com


14WiandaPusponegoro-Vice President Corporate Communication PT Pertamina (Persero)
Gresik has become the hub of gas infrastructure in East Java province. The
detailed gas fields and gas pipes infrastructures supplying Gresik are shown in
Figure 11 -5.

As seen in Figure 11 -5, major gas fields in East Java are Pagerungan, Sirasun
and Terang in Kangean Block developed by BP. Not all of the gas supply to
Gresik has been allocated for power generation. Some of the gas has also been
consumed by PT Petrokimia Gresik and other industrial consumers through
PT PGN (Persero).

Figure 11-5 Gas fields and gas pipes infrastructures supplying Gresik

Looking at the existing gas supply contracts and the actual gas delivery as
outlined above, it can be concluded that supply of gas from Pertagas EJGP (KEI)
cannot guarantee the supply of gas to PLTGU Madura Project in the long term.
New gas discovery and development is urgently needed to support the
sustainability of PLTGU Madura operations in the long term.

11.5 POTENTIALS OF NEW GAS SUPPLY

11.6 PROJECTION OF GAS BALANCE IN MADURA POWER PLANT


The quantity of gas consumed by a PLTGU would depend on the operation
mode of the plant. The operation mode will be decided by the load dispatch
center (PLN P2B Java-Bali) that takes the responsibility for managing energy
management system of the whole Java-Bali power system.

When PLTGU Madura is running as a load follower, it will consume some


43.33 bbtud of gas. Apparently this gas demand cannot be fully satisfied by the
closest gas fields, which is MAX. Moreover, utilizing gas from Java is not
recommended due to the full allocation of EJGP pipeline. In addition, as can be
seen in Figure 11 -6, gas shortage is estimated to occur in Gresik in 2019. If
additional gas supply to Madura is supplied by EJGP pipe, the gas deficit in
Gresik will be more quickly materialized. Unfortunately, this situation will be
worse if new discovery and development of natural gas is not successful.

Figure 11-6 Expected Gas Shortage Situation from 2019 in Java15

11.7 LNG OPTION FOR PLTGU MADURA


11.7.1 Experience with LNG in Indonesia

It has been argued that gas supply through pipes will be declining in the near
future as shown in Figure 11 -6. Meanwhile, the prospect of having new gas
supply from potential gas fields is still not entirely guaranteed, and there is no

15 System Planning Division of PLN


assurance that the potential will be fully materialized in time. Another option of
gas supply is required.

Learning from experience in Muara Karang power plant in the past few years,
supply of natural gas in the form of LNG can be a viable option to substitute the
declining supply of pipe gas. In the case of Muara Karang, LNG has been
shipped from Bontang to an FSRU operated by PT Nusantara Regas (NR) and
stationed about 12 miles off-shore from the power plant. The LNG price from
NR is indexed to crude price (ICP) according to a pricing formula 16, so that in
reality, the LNG price has varied between USD 18 (at high ICP) and less than
USD 10 (at the current low ICP).

Another example is gas supply to Muara Tawar power plant. The gas fields in
South Sumatra supplying Muara Tawar through SSWJ II17 have been declining.
PT PGN (Persero) has responded to this situation by installing FSRU in
Lampung in 2014. The gas company has been striving to get LNG allocation
from the government under DMO policy to supply Muara Tawar by LNG
through SSWJ II gas pipe line18.
11.7.2 Sources of LNG

There are several LNG producers in Indonesia, which are:


(i) Arun: it is now fully depleted and has been coverted into merely an LNG storage
and regasification facility,
(ii) Badak/Bontang in East Kalimantan: it is still a major LNG producer, but it starts
to decline,
(iii) Tangguh in Papua: it is now producing and undergoing expansion to build train
3,
(iv) Donggi Senoro: it is under development and start producing,
(v) Sengkang: it is under development,
(vi) Jangkrik (Muara Bakau): it has been POD in 29 November 2011 and start
producing in 2017.

The illustration of LNG refineries in Indonesia is shown in detail as follow:

16 The gas pricing formula is 11% of ICP plus Alfa, in which Alfa is about US$ 3.5 per MMBTU to cover
the costs of LNG transportation, storage and regasification.
17 SSWJ II : South Sumatra West Java gas pipe line II.
18 But the effort of PGN still not successful.
Figure 11-7 Location of Natural Gas Processing Industry19

In 2015, Indonesia has LNG processing field with the capacity 39 MTPA. LNG
refineries which is located in Arun (6,8 MTPA), East Kalimantan Bontang (22,6
MTPA), Tangguh in West Papua (7,6 MTPA) and Donggi Senoro Central
Sulawesi (2 MTPA). LNG refineries in Arun have become LNG storage and
regasification facility in 2014 due to the gas deficit production. To increase the
production of LNG in Indonesia, the government has developed to build new
refineries LNG Tangguh Unit for Train 3.

Most of the LNG produced in Bontang has been committed to international


buyers20. Likewise with Tangguh and Donggi Senoro LNG plants, in which
most of LNG produced in those LNG plants will be exported 21, though some of
it, especially from Tangguh Train 3 has been allocated for domestic market, at

19 Pusdiklatmigas ESDM 2015


20 Japan, Korea.
21Tangguh to China, Donggi-Senoro to Japan.
least some part of it22. LNG Tangguh Train 3 have been planned to be on stream
in 2020 with the capacity of production is 3,8 MTPA 23. It is estimated that
PLTGU Madura can utilize the production of LNG Tangguh Train 3 due to
higher production capacity and also this refinery is regulated to allocate for
domestic market by government.

In addition, recent development in the new governments policy indicates that


more gas will be allocated by the government to domestic gas consumers. This
is in line with DMO policy under government regulation No.35/2004. In the
regulation, LNG producers are required to allocate some percentage of their
production to domestic consumers. At the time of writing this report, the
percentage of DMO set by the government is 25% of the LNG production.
Therefore all LNG producers are required by the government to allocate 25% of
their outputs to domestic market, whilst the majority 75% could still be
exported to get perhaps higher price in international market.
11.7.3 LNG for Electricity Sector

The allocation and utilization of natural gas for the provision of electricity
sector has been regulated in ministerial decision No. 1750 K/20/MEM/2017.
Based on the regulation, there are two power plants which have been
contracted to be supplied by LNG, they are PLTGU Jawa 1 and PLTGU Jawa 2.
Mostly, LNG productions for the power plants are supplied by LNG refineries
in Tangguh and Bontang. From 2017 to 2026, the total LNG contracted for
electricity sector is 2,525 bbtud. Amount of LNG which has been contracted is
presented in Table 11 -4.
Year
NO. Power Plants Supply Total
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
LNG Tangguh via
51 59 - 68 170 161 144 144 144 144 1,085
FSRU PT NR
1 PLTGU Jawa 2
LNG Bontang via
FSRU PT NR
LNG Tangguh -
2 PLTGU Jawa 1 96 192 192 192 192 192 192 192 1,440
Jawa 1
Total Capacity (in
51 59 96 260 362 353 336 336 336 336 2,525
bbtud)

Table 11-4 LNG Contracted for Power Plants24

22 According to KKS (KontrakKerjaSama) with BP, 40% of the production of Tangguh train 3 will be
allocated for electricity generation in domestic market.
23 IGU (International Gas Union) World LNG Report 2017 Edition
24 Ministerial decision No. 1750 K/20/MEM/2017
Otherwise, the allocation of LNG which is stated in ministerial decision, have
ten power plant which are allocated to be supplied. Instead of Bontang and
Tangguh field, LNG Jangkrik, LNG Gendalo Gehem, LNG Mahakam, and LNG
Wasambo are planned to supply those power plants. All of the power plant,
which are mentioned, are illustrated in Table 11 -5.

Table 11-5 allocation of LNG for Power Plants

Amount of LNG which will be supplied for power plants in 2017-2020 are
merely two, they are PLTGU Jawa 2 and PLTGU Muara Tawar. Started in 2021,
there are eight power plants which demand LNG as fuel. Based on the table
above, the total capacity of LNG which are allocated to the power plants are
6,203 bbtud. It means the demand of LNG as the fuel will have pretty increased.
More clearly, the ratio of LNG allocation and demand for power plants are
illustrated in the Figure 11 -8.
Figure 11-8 Demand vs. Supply of LNG for Power Plants25

Running PLTGU Madura as load follower, it will need 23 bbtud for 1 on 1


configuration if LNG is used as the main fuel. The Commercial Operation Date
(COD) of PLTGU Madura is planned in 2021. Therefore, started in 2021, the
demand of power plants will much increase.
11.7.4 Gas Supply for Madura

Economic life of PLTGU Madura is expected at least 20 years and it requires


about 43 bbtud of gas when running as a load follower. Meanwhile, MAX can
only supply 28-40 mmscfd for 10 years. The potentials for having new gas
supply from new fields are also largely uncertain as been discussed earlier.
Even then, the supply potentials would last only for several years. Many gas
fields close to Madura have been allocated and contracted to PLTGU Grati,
Gresik, other industries and households in Java as explained earlier. Therefore,
it is highly unlikely that the nearby gas sources can satisfy the gas demand of
PLTGU Madura project.
11.7.5 Feasibility of LNG Supply System for Madura

Considering the cost of primary energy (pipe gas or LNG) will be passed
through to PLN by PLTGU Madura Project, it is recommended that PLN would
strive to obtain additional pipe gas supply for PLTGU Madura. This
recommendation is critical in order to ensure sustainable operation of PLTGU
Madura.

25 Ministerial decision No. 1750 K/20/MEM/2017


Discussion had been held to clarify the possibility of having reserve gas
supplies to Madura. As it has been stated before, MAX gas fields with the
capacity of 40 mmscfd only has production time of 10 years. Furthermore, the
gas fields of EML have not been clarified. Therefore, LNG seems to be a sensible
option for the PLTGU Madura.

An LNG system in general would involve gas liquefaction process at the gas
production point. The liquefaction would take place at cryogenic temperature.
LNG would be loaded into cryogenic storage on a ship, and transported to
destination. At the destination, LNG is discharged from the storage on the ship
through a cryogenic pipe line to a cryogenic storage, either off-shore (FSRU) or
on-shore (land-based LNG terminal). LNG would undergo regasification before
sending to the plant gate.

Feasibility of LNG supply system in Madura is not covered in this feasibility


report. It is recommended PLN undertakes a separate feasibility study for LNG
supply system in Madura. The scope of LNG feasibility study should cover at
least assessment of LNG source/sources, transportation through an LNG ship,
cryogenic storage, regasification, gas delivery system to the plant gate, and its
gas price.

Shallow bathymetry of the coast of Sumenep needs special attention, as it may


put an additional constraint to the construction of LNG unloading jetty.

11.8 ESTIMATE OF GAS PRICE

Ministerial regulation of ESDM No. 11 of 2017 is used as the regulatory basis for
estimating the gas price for PLTGU Madura Project. The Project is not a power
plant at well-head, therefore the gas price would be regulated by 11.5% ICP
regulation.

According to the regulation, if there is a downstream infrastructure, the gas


price at plant gate will be applied. The gas price at plant gate consists of
upstream natural gas price and the cost of gas transmission. PLN can buy gas at
maximum price of 11,5% of ICP per mmbtu.
On the other hand, if the gas price is more than 11,5% ICP, LNG is allowed to be
used. PLN can import LNG to fulfill the gas demand, but the maximum price of
imported LNG is 11,5% ICP. If the price of imported LNG is over 11,5% ICP,
PLN can buy pipe gas at a price over 11,5% ICP. PLN can also buy domestic
LNG at a price more than 11,5% ICP.

On the basis of this regulation, the gas price for PLTGU Madura is estimated at
$8,05/mmbtu, under assumption ICP is US$ 70 per barrel. This ICP price is
taken by considering the ICP has increased to US$ 53,4 in February 201726. It is
estimated that ICP may increase in the future. Therefore, US$ 70 for ICP seems
to be a safe figure that can be taken to estimate the gas price.

Similarly, LNG price would be $9,5/mmbtu in this feasibility study. This is


calculated from 11,5% ICP with additional alpha. The alpha of Nusantara Regas
in Jakarta has been US$ 2,5/mmbtu, which is deemed quite high and it could
had been lower. The alpha for PLTGU Madura is assumed to be US$ 1,5 per
mmbtu. To recapitulate, the gas price for PLTGU Madura is $9,5/mmbtu for
LNG (alpha included), and $8,05/mmbtu for pipeline gas plus unknown gas
transmission cost.

11.9 CONCLUSION

The gas supply plan for PLTGU Madura project in Sumenep is highly
uncertain. It is located quite close to EML gas fields, but at the time of writing
this report, it is still in the early phase of exploration and there has been no
commercial agreement between PLN and gas producer of EML.

The most probable gas source is MAX fields on the shore of Sampang, but it is
too far away from Sumenep and would only produce 40 bbtud and last only for
10 years. In addition, the cost for gas transmission from MAXs gas fields to the
PLTGU project is unknown, but can be significant. Even then, the gas supply to
PLTGU Madura is not sufficient if only relying on MAX gas fields. At present
there has been no commercial agreement between PLN and gas producer of
MAX.

26 News Archive of Ministry of Energy and Mineral Resources .Web. 5 March 2017
If the gas demand of PLTGU Madura project is supplied by EJGP pipeline using
Gresik gas system, shortage of gas in early 2019 is expected. Therefore, LNG
would be a sensible option for the PLTU Madura Project. A separate feasibility
study of LNG supply system in Madura is required, but beyond the scope of
this feasibility report.

The maximum price of gas by pipeline is estimated to be $8,05/MMBTU plus


unknown gas transmission cost, and $9,5/mmbtu (landed price) for LNG.