Indonesia mulls restricting LNG exports

Indonesia is considering limiting LNG exports to ensure sufficient gas supply for domestic needs, particularly as spot prices remain volatile despite a downtrend since late last year, an official at a state-owned energy company said.

Export curbs are not unheard of in the country, where coal exports were last banned for a month in January 2022. Meanwhile, Indonesian palm oil producers had to obtain licenses to export their products for six months starting 24 January 2022, in a bid to reduce palm oil prices.

Existing contractual export commitments will likely be maintained in the event of an LNG export ban, although finer details of the arrangement are still being worked out. LNG exporters such as Indonesia's Pertamina are still awaiting further instructions and confirmation from the authorities.

Indonesia exported 6.67mn t of LNG in 2022, significantly higher compared to 4.61mn t in 2021, according to data from GTT.

LNG spot prices have continued on a downtrend since late last year, as a milder-than-expected winter in the northern hemisphere left northeast Asian utilities with higher inventories. This has continued to weigh on summer restocking demand from utilities, with current buying interest mostly stemming from opportunistic Chinese second-tier firms seeking to take advantage of relatively lower imported LNG prices. This has coincided with higher demand for gas-fired power generation in China as temperatures particularly in south China have increased in recent days, market participants said.

The front half-month of the ANEA, the Argus assessment for spot LNG deliveries to northeast Asia, was at $8.77/mn Btu on 31 May, an 88pc drop from a record high of $71.855/mn Btu on 29 August 2022, in the wake of a halt in Russian pipeline gas flows to Europe through the 55bn m³/yr Nord Stream 1 pipeline.

By Rou Urn Lee