Minister of EMR Ignasius Jonan at International Event -Photo by MEMR Office

JAKARTA (TheInsiderStories) – Indonesia and Japan are is exploring the possibility of LNG-based power generation on ships to providing power to islands in the largest economy in the region. The concept would be a first for full-scale LNG power generation at sea.

The LNG would be delivered by tankers from Indonesian terminals to ships equipped with storage tanks and power-generating turbine systems. The strength of the idea comes from their potential for rapid deployment, says Japan’s Minister for Economy, Trade and Industry Hiroshige Seko during his meeting with Indonesian Minister Energy and Mineral Resources Ignasius Jonan on Monday (16/10).

Indonesia has over 13,000 islands, and many rely on diesel generators for power. Initial testing would involve around 10 islands close to East Timor, such as in the Maluku area. The idea is seen to be a way to counter China’s growing influence through its “One Belt, One Road” initiative. This includes boosting power and transportation infrastructure in the region.

Under the ambitious plans, a joint venture to sell electricity, comprised of Japanese companies and Indonesia’s state power company, would be established. The development is expected to cost around JPY300 billion (around US$2.68 billion).

Earlier this year, Japanese LNG infrastructure firm Chiyoda Corporation and engineering company Modec announced the development of a ‘power plant ship’ that uses LNG as the fuel for electricity generation. The FSRU came on the market earlier this year.

MEMR Jonan has been in a working visit to Japan from Oct. 16 to Oct. 18, and will meet with LNG Japan Corporation. Among the activities of LNG Japan Corporation in Indonesia is the Tangguh LNG Project.

Jonan will also meet Japanese Prime Minister Special Advisor Hiroto Izumi. In this meeting they will discuss strategic cooperation between Indonesia – Japan in infrastructure development and other bilateral cooperation. On the same day Minister will hold a meeting with the Japan Bank for International Cooperation (JBIC).

As is well-known, JBIC represents public funding agencies and export credit agencies wholly-owned by the Government of Japan. Today, Jonan, together with delegates, plans to visit Japan Petroleum Exploration Co. Ltd., commonly known as Japex, a Japanese company established in 1970, with a long track record of investment in Indonesia.

A meeting with Inpex on Tuesday was about maintaining production levels on Mahakam block. The next agenda is a meeting with Mitsubishi Corporation; Mitsubishi investment in energy and mineral resources in Indonesia includes oil and gas, electricity, and mining. Following this meeting, the agenda will center on Tokyo Gas.

The Minister’s agenda will close with a meeting at the Japan International Cooperation Agency (JICA). Minister Jonan is also scheduled to meet with Seko.

At the same time, for six days, from Oct. 16 to 21, Minister of Industry Airlangga Hartarto has several agenda issues for meetings with industry players and stakeholders related to Sakura State, among them the directors of Fujitrans Corporation, Mitsubishi Motors, JFE Steel and Sango Corporation.

In addition, a delegation of the Japan Economic Economic Committee (JIEC), The Japan External Trade Organization (JETRO), Nagoya Chamber of Commerce and Industry (NCCI), local governments Aichi and Ogawa, also attended an Indonesia Investment and Business Forum (IIBF).

Hartarto hopes that from these activities a mutual agreement can be reached to grow the manufacturing sector through increased investment and market expansion. He affirmed that his side has not only encouraged investment from large-scale Japanese manufacturing companies but also seeks cooperation with the development of technology and innovation, human resources, and small and medium industries in Indonesia.

Hartarto is optimistic about an increased investment flow into the industrial sector, especially from Japan. The Minister noted that in 2016 the total foreign investment recorded reached US$16.68 billion. Meanwhile, the value of Japanese investment to Indonesia amounted to $5.4 billion in 2016, for an increase of 86 percent over the previous year ($2.9 billion).

The number of Japanese companies in Indonesia to date is more than 1,750, with activities in manufacturing, infrastructure and services. Several Japanese manufacturing sectors are quite active in investing in Indonesia, including the automotive industry, metal, machinery and electronics.

“This is also supported by a number of supporting facilities in conducting business in the country, including deregulation or simplification of policies, infrastructure development and industrial estates, as well as providing fiscal incentives in the form of tax allowances and tax holidays,” said Airlangga.

Indonesia has produced 1.22 million MMSCFD of gas to date, according to data from the task force. The biggest producer is ORF SAKRA field, operated by PT Medco E&P Natuna with production capacity of 377 thousand MMSCFD or about 31 percent, followed by GMS ConocoPhillips Grissik operated by ConocoPhillips Ltd with production capacity of 103 thousand MMSCFD or about 8.4 percent, as well as PT Donggi Senoro LNG, operated by Pertamina and Medco Tomori Sulawesi LTD with production capacity 61 thousand MMSCFD or 5 percent.

Indonesia is expected to suffer a gas deficit in the next five years, due to limited reserves. Having said that, domestic consumption has risen sharply, by 170 percent, from 1,480 BBTU in 2013 to 3,997 BBTU in 2016. Meanwhile, Indonesian gas exports declined by 34.9 percent, from 4,397 BBTU in 2003 to 2,860 BBTU in 2016.

Writing by Linda Silaen, Email: linda.silaen@theinsiderstories.com