Natural Gas as Petroleum Fuel Substitution: Analysis of Supply-Demand Projections, Infrastructures, Investments and End-User Prices

Authors

Abdul Qoyum Tjandranegara, Chemical Engineering Department, Faculty of Engineering, University of Indonesia, Depok 16424, Indonesia
Arsegianto Arsegianto, Petroleum Study Program, Faculty of Mines and Petroleum Engineering, ITB, Bandung 40132, Indonesia
Widodo Wahyu Purwanto, Chemical Engineering Department, Faculty of Engineering, University of Indonesia, Depok 16424, IndonesiaFollow

Abstract

The petroleum fuels (PF) subsidy has long burdens the government spending, and discourages less expensive energy usage such as natural gas (NG). Exporting NG and importing the more expensive PF products cause financial losses to Indonesia. The lack of NG infrastructure is the main hurdle in maximizing domestic NG usage and so does the perception of its high investment costs burdening government spending and pushing the NG transportation cost up. This study calculates the required NG infrastructure and its investments for several levels of PF substitutions up to 2030. To balance the NG demands, the supply from each field and its corresponding infrastructures needed was calculated and optimized using non-linear programming with generalized reduced gradient method to calculate the lowest transportation cost for the consumers. The study shows with a favorable return on investments attractive to private investors, the NG prices can still be put much lower than PF prices, allowing subsidy, import and production cost savings in many sectors. Furthermore, the highest level of substitution scenario needs only US$ 2.07 billion a year investment, very low compare to the current US$ 14.17 billion a year PF and electricity subsidy.

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Recommended Citation

Tjandranegara, Abdul Qoyum; Arsegianto, Arsegianto; and Purwanto, Widodo Wahyu (2011) "Natural Gas as Petroleum Fuel Substitution: Analysis of Supply-Demand Projections, Infrastructures, Investments and End-User Prices," Makara Journal of Technology: Vol. 15: Iss. 1, Article 8.
DOI: 10.7454/mst.v15i1.856
Available at: https://scholarhub.ui.ac.id/mjt/vol15/iss1/8