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LNG imports from Indonesia: Bangladesh may rethink deal due to graft charges, potential supply crunch

  • Published at 09:16 pm September 25th, 2018
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Bangladesh might have to start looking outside of Indonesia for LNG imports Syed Zakir Hossain |Dhaka Tribune

Indonesia’s domestic gas reserves are also reported to be dwindling

The Bangladesh government may reexamine an agreement for the import of liquefied natural gas (LNG) from Indonesia, following allegations of corruption against the supplier and a potential supply shortfall, officials said.

Asking to remain anonymous, sources at the Power, Energy and Mineral Resources Ministry and the state-owned Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), said the government was scrutinizing the deal due to significant upheaval in Indonesian state energy company Pertamina over the past year. Furthermore, Indonesia’s domestic gas reserves are also reported to be dwindling.

A official at the Power, Energy and Mineral Resources Ministry, said there was an energy shortfall in Indonesia even when the deal was signed between Petrobangla and Pertamina.

A letter of intent was signed by the two state energy companies on January 28 this year, under which Bangladesh was set to import as much as 17.5 million tons of LNG per year till 2025.

Pertamina may need to engage a third party to supply the gas, instead of supplying the fuel itself, the official added.

Despite repeated attempts, Petrobangla Secretary Syed Ashfaquzzaman, who signed the deal, could not be reached for comment.

According to a report published by Reuters in October last year, Indonesia may need to become a net LNG importer by 2020 to meet its own skyrocketing demand, as the country’s gas reserves are depleted. Pertamina echoed this sentiment, predicting that Indonesia’s LNG deficit may be as high as 4 billion cubic feet per day by 2030.

Given that 55%of Indonesia’s gas demand comes from the island of Java, the province of West Java’s gas deficit will grow by five times from 2015 to 2030, said Irma Surya, general manager of Pertamina’s LNG sales, as quoted in the Reuters report. 

Pertamina’s Upstream Director, Syamsul Alam, urged the Indonesian government to declare that the country is is facing an energy crisis, as it is now a net oil importer and would soon become a net gas importer, The Jakarta Post reported on December 7 last year.

“The government does not need to hide the condition of the Indonesian oil and gas [industry],” he said, adding that with the current level of natural gas exploitation, Indonesia would become a net natural gas importer by 2023. 

In February 2017, Pertamina removed both its chief executive and his deputy for what local media termed anomalies.

In April, The Indonesian Attorney General's Office (AGO) sued former director of Pertamina, Karen Galaila Agustiawan, in a corruption case, after the country suffered a loss of US$39.7 million, The Jakarta Post reported.

Genades Panjaitan, Pertaamina’s chief of legal counsel and compliance, and Frederik Siahaan, the company’s former financial director, were also named in the case, the report added. On September 24, Galaila was detained by the Attorney General Office (AGO), as a suspect in connection with the case.

Sources from Petrobangla and the Power, Energy and Mineral Resources Ministry, said it may be better to withdraw from the deal with Indonesia in light of these irregularities.

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