On 19 February 2019, Repsol announced a gas discovery in the Sakakemang production sharing contract (PSC), located within the South Sumatra Basin, which contains at least 2 Tcf of recoverable reserves, through a preliminary estimation. The company also plans to follow up the discovery with an appraisal well in the coming months.

This is Indonesia's largest gas discovery in 18 years. Based on the operator's reserve of 2 Tcf, gas production of 270 MMcf/d could be injected into the system over 20 years. However, further appraisals will provide a more accurate figure. Should the appraisal be successful, we expect Repsol to push for a fast-track development program. Given the well-connected infrastructure, an optimistic start date for production would be in 2024.

There are two monetization options Repsol and its partners may adopt for the Sakakemang gas discovery: they could choose to sell the gas to the West Java market or export it to Singapore.
Repsol and its partners could negotiate access to the existing pipelines to transport gas to the West Java market to serve new gas-fired power plants post-2024, or to Singapore as the existing piped gas contract with South Sumatra expires in 2023.

The impact of the Sakakemang gas discovery coming onstream would be significant. Indonesian LNG demand could be reduced by up to 2.0 million tons per annum from 2024. However, we do not expect existing sales and purchase agreements from international sources to be affected as they begin before the Sakakemang begins production. Pertamina is likely to continue to divert its international supplies owing to the weak Indonesian LNG demand forecast.

Clients can access the full details on Connect, Largest gas discovery in Indonesia in 18 years could reduce Indonesia's LNG demand by up to 2 MMtpa.

Further details about the Indonesian gas market can be found on our South and Southeast Asia Power, Gas, Coal and Renewables page.

Geena Chatterji is a Senior Research Analyst at IHS Markit.
Posted 27 February 2019

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.