Conrad Asia Energy, an Asia-focused natural gas exploration and development company, is pleased to announce that it has received a Directive from the Indonesian Ministry of Energy and Mineral Resources ('MEMR'), including that:
- Due to the very strong growth in domestic demand for gas in Indonesia, the Indonesian MEMR has directed that all Mako Gas Field gas (plateau sales gas rate of 111 billion British Thermal Units per day ('Bbtud')) be made available for the Indonesian domestic market in Batam with the gas to be purchased PT PLN Energi Primer Indonesia ('PLN EPI' or 'PLN') a wholly owned subsidiary of PT Perusahaan Listrik Negara (Persero) (“PLN Persero”).
- PLN Persero is the Indonesian state-owned electric utility company, wholly-owned by the Government of Indonesia through the Ministry of State-Owned Enterprise. The organisation has over 7,000 power plants supplying over 89 million customers and sells over 288,000 GWh of electricity annually(1) .
- Conrad holds a 76.5% operating interest in the Duyung Production Sharing Contract ('PSC') in which Mako is located, offshore in the West Natuna Sea, Indonesia.
- The Mako gas price will be linked to the Indonesian Crude Price ('ICP'), which is akin to Brent oil-linked Liquified Natural Gas('LNG') pricing. Thisstructure will be economically equivalent to the pricing previously approved for Mako gas to be sold both domestically and for export, thereby underpinning the value of gas from Mako.
- As a result of the MEMR Directive, Conrad is working to finalise a Gas Sales Agreement ('GSA') with PLN. Conrad is coordinating closely with PLN and SKK Migas (the upstream regulator), who collectively have targeted that a GSA with PLN will be finalised during March 2025 and be signed in the coming weeks.
- In addition, MEMR has revoked its earlier allocation and pricing Directive to sell Mako gas to PT Perusahaan Gas Negara Tbk ('PGN') and Sembcorp Gas Pte Ltd. ('Sembcorp'). The GSAs with PGN and Sembcorp will subsequently be terminated.
- The new Government of Indonesia is formulating its New Energy Plan 2024-2034 (or 'New RUPTL') under which it will prioritise gas exploration and production to meet rapidly rising domestic energy demand. Around 15 Gigawatts ('GW') of gas power capacity across Indonesia is planned to be built until 2034, especially to support the base load capacity(2) .
- Conrad has five flow tested gas discoveries in Indonesia in strategic areas and is well positioned to contribute to this increased demand.
- The MEMR Directive is anticipated to support the pending farmout arrangements in Duyung and Aceh and Financial Investment Decision ('FID') for Mako.
(1) PT Perusahaan Listrik Negara (Perser) company profile, https://web.pln.co.id/statics/uploads/2024/12/COM-PRO-PLN-2023.pdf.
(2) Indonesia plans to boost renewable usage in new electricity supply plan, Reuters, 11 February 2025.
Conrad Managing Director and Chief Executive Officer, Miltos Xynogalas, commented:
'The approval of the new price and allocation for the GSA between the Mako Joint Venture, the Indonesian Government and PLN is a significant event. It has taken considerable time and effort to reach this important milestone and we can now move forward with greater confidence in all our projects. Oil-linked prices for pipeline gas contracts in Indonesia have been uncommon. Approval of such a structure for Mako demonstrates the willingness of the Government of Indonesia to secure gas for local consumption whilst ensuring that the producer is not economically disadvantaged. The PLN GSA underpins the financial viability and the value of the project and aligns with Indonesia’s new energy priorities. Indonesia is the fourth most populous country in the world and has amongst the fastest growing economies in the world.
Mako is the first of what we expect will be several gas projects that Conrad aims to bring into commercial production from our existing portfolio of gas discoveries, including our Aceh gas resources. Asia has the fastest gas consumption growth in the world. As its economies transition away from coal to the cleaner burning natural gas and we are proud to be involved in this transition. The resultant strong gas demand in Indonesia underpins the value of our discovered resources and our investment thesis.
The ongoing revision to Indonesia’s energy policy highlights the importance of Mako as well as the significant potential of Conrad’s Aceh gas assets. The Government recently announced of the roll-out a US$1.5 billion project to distribute liquefied natural gas (“LNG”) on a small scale to feed dozens of power plants now running on diesel via a unique hub-and-spoke model across Indonesia’s vast archipelago(3) . This has potential implications for Conrad’s discovered resources in offshore Aceh and for its previously announced small scale LNG collaboration with PGN(4,5).
The ongoing revision in Indonesia’s energy priorities has impacted the timing of the Mako project. However, the offset positive value driver across our portfolio is significant and underscores our strategy to focus on gas. Conrad is now in a much stronger position to attract partners into all our projects and this now gives us broader financing options from domestic sources'.
As part of the Mako project Conrad also understands that MEMR will direct PLN to build the required approximately 7 kms gas spurline with an investment value of approximately US$50 million to link the West Natuna Transportation System (“WNTS”) with Pemping Island and subsequently to markets in Batam. The building of the pipeline and anticipated significant growth in gas demand, provides a spur to future exploration of Conrad’s Duyung PSC Prospective Resources and gives a ready means to commercialise additional gas volumes.
The new Government of Indonesia is formulating a New Energy Plan 2024-2034 under which it will prioritise gas exploration and production to meet rapidly rising domestic demand. Over the next decade, Indonesia anticipates natural gas demand to grow. In January 2025, the Energy Minister Bahlil Lahadalia confirmed, “The orientation is to supply domestic demand. If that is not met, we will not permit exports.”(6) .
The proliferation of data centres in Indonesia is one factor contributing to a substantial increase in energy demand (including natural gas) demand. Driven by a combination of location, infrastructure, and government incentives, Batam is emerging as a prime destination for such data centres. As an example, the Indonesian Government has established a Special Economic Zone at Nongsa Digital Park in Batam. Together with the nearby Kabil Industrial Estate, Batam is emerging as a significant hub for data centre development and is witnessing an influx of global data centre companies. Ten companies have already committed to establishing data centres at Nongsa, with nine actively constructing facilities7 .
The Indonesian MEMR has also announced(8) that a new oil refinery with a capacity of 500,000 barrels per day is to be built on Pemping Island, Batam, Riau Islands province. MEMR explained that the Pemping Island was chosen as the location for the refinery construction given its existing and already built supporting infrastructure, including gas infrastructure.
(3) Indonesia embarks on long-stalled LNG push to displace diesel in power plants, Emily Chow & Fransiska Nangoy, Reuters, 07 March 2025.
(4) Conrad Asia Energy Ltd ASX announcement: Aceh Gas Commercialisation MOU Signed with PGN, 01 March 2024.
(5) Conrad Asia Energy Ltd ASX announcement: Aceh Update – Small-Scale LNG, 20 November 2024.
(6) Indonesia Plans to Defer LNG Cargoes as Domestic Demand Grows, Charles Kennedy, OilPrice.com, 23 January, 2025
(7) Batam’s Digital Boom: High Demand for Data Centers at KEK Nongsa, Batam News Asia, 19 July 2024.
(8) The 500,000 Barrel Capacity Refinery Will Be Built On Batam Pemping Island, https:voi.id, 07 March 2025
Source: Conrad Asia Energy
