Indonesia yet to clarify on LNG exports beyond Q1 2025 as it reviews domestic demand

Indonesia has yet to clarify its LNG exports beyond the first quarter of 2025 following its review of domestic natural gas demand, sources familiar with the matter told S&P Global Commodity Insights Jan. 31.

The country has been reviewing its domestic gas demand and LNG exports since late 2024 as initial assessments of needing more than 50 LNG cargoes for domestic requirements in 2025 were larger than expected, sources said.

The initial assessments of domestic gas requirements for 2025 made Indonesia's LNG exports uncertain, however, the country allowed LNG exports for the first quarter at the beginning of the year, sources said.

The Southeast Asian producer is still scrutinizing a number of LNG cargoes necessary from the country's projects -- Bontang, Tangguh and Donggi-Senoro -- for domestic demand and its quarterly exports beyond Q1 for 2025, with the move creating uncertainty for buyers, sources said.

A source at one Asian buyer of Indonesian LNG confirmed that LNG exports have been cleared for Q1 2025. However, it remained unclear about exports from April onward.

"Indonesia seems to want to take [LNG] cargoes to the domestic market as demand is strong," said a source with another Asian lifter of Indonesian LNG, adding that the Q2 export approval is in focus.

"The impact on the Asian LNG market will be not small [if Indonesia's exports are suspended]."

Commodity Insights reported Jan. 24 that Indonesia is projected to need an additional 54 LNG cargoes for 2025 to meet its domestic gas requirements amid declining production levels.

Asked to comment on whether Indonesia would halt LNG exports, Energy and Mineral Vice Minister Yuliot Tanjung said Jan. 31, "If there is a contract with an overseas buyer, we must fulfill the contract."

"So, we can't just cancel the contract. Therefore, if there is a need, we will look at the domestic allocation, and see which can be allocated for the domestic market and which for the contract."

Top 10 producer

Indonesia is among the world's top 10 LNG producers and a key supplier to consumers in Japan, South Korea, China and Taiwan through its three main projects.

The resource-rich country also has a long history of nationalization, which has seen Jakarta impose export restrictions on a wide range of commodities, including coal, nickel ore, palm oil and even carbon credits, in previous years.

The government recently said it would divert all state crude oil allocations originally intended for export to be processed domestically as part of a broader move toward energy self-sufficiency, which was a thorny issue in its recent elections. It has even asked for the crude specifications to be changed to match domestic refineries.

Energy and Mineral Resources Minister Bahlil Lahadalia said the country plans to delay LNG exports to meet rising domestic demand and prioritize LNG for domestic use before allowing exports, local media reported Jan. 23.

Indonesia has been diverting about 5 million mt/year of LNG for domestic consumption out of its total LNG production of almost 18 million mt/year, a share that has been rising over the years from no diversions in 2011, according to historical data.

Annual assessments

The country in recent years implemented a policy of annual export assessments so that sufficient piped gas and LNG can be allocated for the domestic market, but growing uncertainty has pushed customers such as Singapore to expand LNG receiving capacity and hedge long-term gas supply.

Indonesia's own LNG import plans are also in limbo as they require government approval despite state power and gas companies PLN and PGN not having enough gas supply contracts.

"PLN and PGN remain under-contracted, and for both to continue relying on annual LNG cargo allocations is not sustainable," Johan Utama, principal research analyst at S&P Global Commodity Insights, said.

"Future Indonesian LNG output that will come from projects such as Eni's Geng North and IDD projects, or the Abadi project, are likely to require long-term offtake arrangements to go ahead. Beyond the volume availability, pricing policy such as capping prices for domestic industries and the power sector also need to be factored in," Utama added.

Allowing the import of international cargoes is straightforward, but if PLN's short-term purchases have to be done at relatively high market prices, and more low-priced domestic cargoes are diverted, the issue gets more complex, market analysts said.

LNG buyers with long-term contracts could be more willing to defer since they have longer contract periods. However, this just kicks the can further down the road since Indonesia has to make up for the deferred cargoes at a later date regardless of any penalties, analysts said.