Natural gas is a vital component for world energy supply
Natural gas is a vital component for world energy supply. Natural gas is an important source for both fuel and ammonia production (ammonia is a vital component for fertilizer production). Similar to crude oil and coal, natural gas is a fossil fuel derived from the remains of plants, animals and microorganisms, stored underground for millions of years. But unlike other fossil fuels, natural gas is one of the cleanest energy sources (has a low carbon intensity), the safest and most useful of all energy sources.
An important image of natural gas is that this fuel plays a significant role in most sectors of the world economy (Approach to regulating gas flaring). Moreover, due to the fact that there are many natural gas reserves in the world - which can be developed and produced without the need for large investments - natural gas is likely to become increasingly important in the future because most countries want to reduce dependence on expensive and inhospitable energy sources environment like oil.
At present, natural gas contributes around 23% of the world's primary energy sources.
The world produces about twice the natural gas it consumes. However, this does not mean that domestic gas production meets domestic gas demand. In fact, there is a shortage of gas for domestic industries in the World. Perusahaan Gas Negara (PGN) has not been able to meet domestic demand. This has wide-ranging impacts because it causes the National Electricity Company (PLN), the largest domestic gas consumer, to experience a structural shortage of gas supply and force PLN to switch to fossil fuels - which are more expensive and not environmentally friendly - others, like petroleum, to produce electricity. Even so, power outages often occur throughout the country (especially outside the big cities of Java), and therefore burden the country's industries.
Moreover, nearly 80 million of the world's population does not yet have access to electricity as indicated by the relatively low percentage of electricity in the world at 84.1% in 2014.
The World Government aims to limit the country's gas exports in order to secure domestic supplies while encouraging the use of natural gas as a fuel source for industrial and personal consumption.
Most of the gas production is exported because the country's gas production is dominated by foreign companies that are only willing to invest if allowed to export this commodity.
At present, foreign companies, such as CNOOC Limited, Total E&P World, Conoco Philips, BP Tangguh, and Exxon Mobil Oil World, contribute to around 87% of the world's natural gas production. The remaining 13% is produced by Pertamina's State-Owned Enterprises (BUMN). About half of the total gas production is sold domestically.
As shown in the table above - and in contrast to national oil production - gas production in the world has remained stable, recording a high in 2010 due to the start of Tangguh field production (located in Papua) in the same year (managed by BP World) which is a important fields in the country's gas industry.
After 2010, gas production has declined due to supply problems.
Although a number of small companies are active in the World gas sector, the majority of domestic production and exploration is in the hands of the six companies mentioned, of which only one is owned by the World (Pertamina). When combined, CNOOC Ltd. from the People's Republic of China (PRC) and Pertamina contribute to more than half of the world's gas production.
Throughout its history, World gas production has always been aimed at the export market.
Nevertheless, the decline in domestic oil production combined with an increase in international oil prices, made the Government decide to make efforts to increase the use of domestic gas from the mid-2000s to the present. In recent years gas use has increased rapidly and reduced exports but limited infrastructure facilities in the World transmission and distribution network complicate further development of domestic consumption. Limited feasible infrastructure is also caused due to lack of investment but also due to the country's geographical condition.
Distribution with tankers is easier than pipelines because important natural gas reserves are located offshore, far from major gas demand centers.
After Qatar, Malaysia and Australia, the World is currently the fourth largest exporter of liquefied natural gas (LNG) in the world. This does not mean - as mentioned above - that domestic demand can be met by domestic production. As a result, the world needs to import LNG from abroad so as not to disrupt export commitments. It is estimated that in 2017 additional supplies from the world's new gas fields will be able to replace imports.