Indonesia: Gas supplies to Singapore remain within contractual minimum

Despite a reduction in natural gas supplies to Singapore, Indonesia’s Coordinating Minister for Downstreaming and Energy Transition Bahlil Lahadalia stressed that the current cuts did not constitute a breach of contract. Bahlil also said Indonesia would not accept lectures on honouring contracts.

At a press conference on Monday (26 October) afternoon, Bahlil said Indonesia had reduced its piped natural gas supply to Singapore by 31 million standard cubic feet per day (31 mmcfd, or about 877,800 cubic metres). The reduction represents about 8% of the 409.55 million standard cubic feet of piped natural gas supplied daily from Indonesia's Natuna and Sumatra regions.

“The 31 million standard cubic feet a day that we have reduced is still within the minimum contractual limits. If we had reduced supplies by 10%, then we would have breached the contract.”

Bahlil said exports had been reduced because of maintenance shutdowns and domestic energy needs. He did not give a clear answer on whether the export cuts would be a standing arrangement, saying only that the situation remained fluid.

He reiterated that Indonesia was “a nation that honours contracts”, adding, “So don’t teach Indonesia how to respect and honour contracts.”

Indonesia began reducing piped natural gas exports to Singapore on Saturday (24 October). According to Singapore’s Energy Market Authority, the cuts account for less than 2% of Singapore’s daily natural gas demand.

Speaking about the matter at the People’s Action Party cadre conference on Sunday (25 October), Prime Minister Lawrence Wong said natural gas supplies were secured by commercial contracts and all parties should honour their commitments. With Indonesia reducing supplies, local importers would take the necessary steps to safeguard their legal rights.

Dr Tan See Leng, Minister-in-charge of Energy and Science & Technology and Minister for Energy, Trade and Industry (Energy and Industry), also said after the conference that the incident would not affect electricity prices in the short term. Should there be a greater impact later, the government would not hesitate to introduce further assistance measures.

Dr Tan also stressed that the Singapore and Indonesian governments enjoyed good relations, particularly between Indonesian President Prabowo Subianto and PM Wong. Singapore also understood Indonesia’s domestic supply needs and the bottlenecks it faced.

Bahlil said on Wednesday (21 October) that, given geopolitical uncertainties and the energy security situation, the authorities were considering halting natural gas exports to neighbouring countries “to ensure Indonesia’s survival and meet domestic needs first”.

Energy issues have also been complicated by neighbouring countries’ concerns over forest fires in Indonesia and transboundary haze. Bahlil warned last week, without naming any country, that he would “not hesitate to consider stopping” energy exports to countries that did not respect Indonesia.

On Monday, however, Bahlil denied that the reduction in natural gas supplies was due to a dispute between Singapore and Indonesia. He told the media: “There is no problem at all. There is no conflict. Do you think there is a conflict? Is there one? No, there isn’t.”

To meet domestic demand, Indonesia will increase energy imports. Bahlil will also visit China, India and other destinations from this week to secure more petrol supplies.

“We cannot predict how long the tension in the Middle East will go on for, so the president has instructed us to find other alternatives for energy supply.”

Soaring international energy prices have led to fuel shortages in parts of Java, Sumatra, Bali and Sulawesi over the past few months. Indonesia’s independent Ombudsman said this month that queues of vehicles at some petrol stations stretched for as long as a kilometre.

Indonesia is exploring the construction of nuclear power plants to strengthen its energy security. Bahlil said the authorities were assessing several possible sites, including Halmahera island in North Maluku province, Kalimantan, Sumatra and the Riau Islands.