JAKARTA: The government is considering using compressed natural gas (CNG) as a substitute for mostly imported liquefied petroleum gas (LPG) to shield domestic energy supplies from global disruptions caused by the US-Israel war against Iran.
The proposal is still under multi-ministerial discussions and has not yet been adopted as national policy, but officials see strong potential given the country’s relatively abundant natural gas resources, according to Energy and Mineral Resources Minister Bahlil Lahadalia.
“The CNG industry is widely available domestically, but it requires equipment to compress gas to around 250-400 bar,” Bahlil told reporters at the State Palace on Monday, adding that the government is working to align stakeholders before moving forward.
CNG is produced by compressing methane extracted from natural gas, while LPG consists mainly of propane and butane derived from gas processing and oil refining.
Indonesia’s limited output of propane and butane has made it heavily reliant on imports of LPG, which is primarily used for household cooking, heating and feedstock for petrochemical plants.
By contrast, CNG feedstock, mainly methane and ethane, is more readily available domestically, potentially reducing reliance on costly imported fuels.
“Hotels and restaurants are already using CNG. Some CNG refuelling stations are also available. We don’t import the raw materials, they’re all entirely sourced within the country,” Bahlil said.
CNG has been used widely in the transportation and power generation sectors, supplying fleets such as Jakarta’s Transjakarta bus network and bajaj (three-wheeled motorcycle taxis).
State oil and gas company Pertamina recently raised prices of non-subsidised LPG products by nearly 19% as LPG prices rose sharply following global energy market volatility linked to geopolitical tensions.
Prices for Pertamina’s 5.5 kilogramme (kg) cylinders rose to 107,000 rupiah (US$6.60) per unit in Jakarta and Java Island, up 17,000 rupiah from November 2023 levels, while 12 kg cylinders increased by 36,000 rupiah to 228,000 rupiah.
South-East Asia’s largest economy is spending significant foreign exchange on LPG mports, with around 500 trillion rupiah spent each year to purchase oil and gas, including LPG.
Domestic LPG consumption stands at around 8.6 million tonnes per year, while local production is only about 1.7 million tonnes, leaving a 7-million tonne gap that must be met through imports.
Supply dynamics have tightened in recent months, with LPG exports from the Middle East, Asia’s largest supplier, falling sharply since the Iran war began in late February, prompting countries to rebalance their sourcing.
Currently, about 85% of Indonesia’s LPG is expected to come from the US, up from around 55% last year.
About 20% previously came from the Middle East, but the government has been shifting towards alternative suppliers, including the US, Africa and Australia, to mitigate disruption risks.
Indonesia has also secured a commitment from Russia to supply up to 150 million barrels of crude oil at a “special price”, according to President Prabowo Subianto’s special envoy for energy and the environment, Hashim Djojohadikusumo.
Hashim, who is also the President’s brother, said the strategic petroleum reserve would serve as a critical buffer against what he described as impending global economic turmoil.
The deal was forged during President Prabowo’s three-hour meeting with Russian President Vladimir Putin on April 13. — The Jakarta Post/ANN
