Abstract

Developing countries usually experience a higher cost of goods and services because of the lack of infrastructure and market development. Often, natural resources are exported to earn much needed foreign exchange. These resources are used as a factor of production in developed nations and then sold to obtain a "processing upgrade/added value", sometimes to the orginal owner of the resource.

Indonesia is poised for a rapid expansion of domestic gas utilization. Two major opportunities are in power generation and in substitution for liquid fuels. These markets represent about 500 MMCFD of gas demand-each - based on existing conditions. The capture of these opportunities by Indonesia would significantly shift the "processing upgrade/added value" on natural gas to Indonesia.

Indonesia currently has about 3500 MW of gas turbine based generating capacity. In addition, there are 2500 MW of gas turbine based capacity under construction. Over 1000 MW of gas turbine based generation is planned by the private sector in the form of Independent Power Producers (IPPs). By the year 2000, Indonesia could have 7000 MW of gas turbine based generation requiring approximately 1.1 BCFD.

The transportation, industrial and power generation sectors used over 400,000 BPD of liquid fuels in 1994. In these sectors, the equivalent of approximately 500 MMCFD could be converted to use gas. Utilization of gas could save the Government $450 million and the private sector $150 million annually. These savings could be used to expand the gas infrastructure and facilitate even greater energy efficiency in future years.

Indonesia is expected to experience substantial, continued economic growth. There is a strong argument for a greatly expanded use of natural gas in the domestic market. Capturing this opportunity for shifting the "processing upgrade/added value" of gas to Indonesia would deliver great benefits to future generations as well as be fortuitous for the energy industry and associated commerce.