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11.1 INTRODUCTION
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.
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.
On Allocation of Gas:
- 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);
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).
As the ministerial regulation of ESDM No. 11/2017 comes into force, it needs to
be followed for PLTGU Madura project.
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)
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.
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.
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).
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.
(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.
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.
(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.
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
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.
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.
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
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
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.
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)
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.
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
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.
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.
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.
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.
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.