Is Indonesia's Domestic Gas Market Ready to Pay the Price for Growth?

Over the past three decades, Indonesia's natural gas landscape has witnessed several turnarounds, from the decline of mature fields to the promise of new supply from emerging basins. In the 1990s, the country was an LNG powerhouse, supplying roughly one-third of the world's LNG, but by the 2010s it was scrambling to meet domestic demand. Gas-rich provinces that once underpinned Indonesia's export dominance have seen output peak and decline, while new opportunities now lie in emerging and frontier areas. North Sumatra, in particular, once contributed 35% of national production in 1990–2000 but is projected to account for less than 2% of total gas production in 2025. The turning point was the closure of Arun LNG in 2014, once Indonesia's largest export terminal. At its peak, Arun LNG ran six liquefaction trains, processing nearly 4,500 MMcfd of gas at plateau. But declining reservoir pressure and unsuccessful near-field exploration around the Lhokseumawe area ultimately forced its conversion into a regasification terminal, now receiving supply from active LNG terminals such as Tangguh in Papua and Bontang in Kalimantan. Across the central part of Western archipelago, East Kalimantan dominated Indonesia's gas production in early 2000s, churning out over 4 bcf/d, with nearly 62% coming from Mahakam block by TotalEnergies and Inpex. That output fed Bontang LNG, the country's largest export complex with eight trains. Today, East Kalimantan remains a cornerstone of gas supply, but the use of Bontang LNG has been reduced to only two active trains, due to declining output of mature fields. This matters beyond just East Kalimantan, as the province has long supplied gas to demand hubs in Java and Sumatra for power generation and industries, and its importance will only grow as Indonesia plans to relocate its capital city to Kalimantan. Sustaining this role now depends on new developments, and central to this strategy is the monetization of Indonesia Deepwater Development (IDD) project in Kutei basin. IDD will be one of key projects standing between maximizing domestic resources to meet energy security or facing the risk of increasing LNG imports. This rising gas demand is not unique to Indonesia, but also acute in Southeast Asia, underpinned by demographic and economic growth. The increase in the region's energy demand is growing faster than almost anywhere in the world. On one side, this shows market might be willing to pay higher prices to secure supply, but on the other, it highlights the urgent need for new domestic supply to avoid LNG import reliance, which is directly exposed to global LNG price swings.