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    WGC: Indonesia, China to Cut Coal in Power Mix

Summary

Indonesia will broadly halve the use of coal in its power sector over the next ten years, its energy minister Ignasius Jonan has told the World Gas Conference.

by: William Powell

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NGW News Alert, NGW Interview, Corporate, Exploration & Production, Political, Ministries, Infrastructure, Liquified Natural Gas (LNG), News By Country, Indonesia

WGC: Indonesia, China to Cut Coal in Power Mix

Indonesia will cut the use of coal in its power sector from 55%-60% today to about 30% in the next ten years, its energy minister Ignasius Jonan told the World Gas Conference in Washington DC, June 26.

This will mean some more gas is needed; indeed according to Wood Mackenzie, the southeast Asian country will need some 22mn mt/yr of LNG by 2035.

Indonesia produces some 425mn metric tons of coal each year, of which a quarter is used to generate power, Jonan said at a panel session chaired by former International Energy Agency head Nobuo Tanaka. 

The world's fourth most populous nation, at over 262mn people, is seeing strong economic growth which means that gas demand is growing but its gas production is not infinite. Jonan expects GDP to grow at 5%/yr for some years to come, and he foresees gas demand growth at 1.2 or 1.3 times the rate at which GDP grows. This has put more pressure on the country to develop more of its gas fields, even though a third of them have a high CO2 content, he said. As it is, Indonesia is moving from mainly oil production to mainly gas production. 

Consumers moreover are free to import LNG if they can get a better price than at home, the minister said, under a new policy.

And speaking for China, the chair of the Beijing Gas Group Yalan Li said the government's aim there is to increase the share of gas in primary energy from 7% to 10% by 2020, which would be at the expense of coal. The country expects its gas demand to rise from 300bn m³/yr now to 400bn m³/yr by 2024, making it the world's biggest consumer after the US. Its 18 LNG import terminals can now import 60mn mt/yr (about 80bn m³/yr), rising to 80mn mt/yr by 2020; this will change though as of those, seven are being expanded and another 11 are planned. 

She did say though that it was far from assured that gas would grow as much as it could in China and Asia generally. First, as gas is considered a transitional fuel in the developed world, she said, some policy makers were focusing exclusively on renewables. This bias against gas will affect decision-makers, she said. And others believe that coal, being abundant at home, should instead be used more, while deploying ultra low emissions technologies, whenever the gas price is high or demand is tight.

That was the case particularly last winter that led to a surge in imports, as China only has enough storage to meet a few percent of its annual demand. The pipeline infrastructure too needs to be developed as much of it is concentrated in major cities and the economically developed east. 

On June 26, the IEA forecast that China next year will become the world's biggest gas importer fuelled by increased LNG imports.

Asked by Tanaka whether China would import LNG from the US, she said - once the laughter had died down -that China was very keen to ensure its supply security, through a mix of indigenous output – the priority as China now produces 150bn m³/yr – as well as pipeline and LNG imports. From the end of next year Russia gas flows will start through the Power of Siberia line, she said. "But of course we need more LNG, as long as the price is reasonable, even if it does come from the US."

In the case of Malaysia, state Petronas is covering its bases by moving gas production overseas, including developing assets in Australia and Canada, to ensure a broad mix of suppliers. "We were blessed with a lot of gas, and we started producing LNG in 1983," said Petronas upstream head Anuar Taib: "But oil and gas are finite and if we want to maintain our leadership, we have to go overseas."

His talk also covered energy poverty: he grew up in a household where, when he was four or five,  cooking was done using wood and coconut shells and lighting came from a kerosene lamp. But there are still hundreds of millions of people in Asia living like that, he said, he said, explaining his motivation for developing the country's gas supply portfolio.  

(Banner photo shows Indonesia's capital city Jakarta, courtesy of Kevin Aurell/Wikipedia)