Economic Analysis of Gas to Liquid Technology as the Solution for Stranded Gas Commercialization in Indonesia

Indonesian energy demand continuously increases in line with economic development and population growth. The average demand growth in the past ten years has been around 6% annually. The demand is supplied primarily by oil (47%). As domestic oil resource is no longer sufficient to fulfill domestic demand, Indonesia's energy policy moved away from oil by promoting the utilization of more abundantly available energy resources such as natural gas. Indonesia has natural gas reserves of 34.65 TCF in 2023. However, such reserves still have not been developed due to economic and physical reasons, called stranded gas. The development of new technology that can commercialize stranded gas is expected to fulfill the growing energy needs. The common problem of stranded gas is when it is remote from the gas market, making the construction of a pipeline prohibitively expensive. Alternative ways of converting gas into denser energy and transporting the energy using the non-pipeline mode to the customers need to be developed. Gas-to-liquid (GTL) technology is one of the technologies currently being developed because of its ability to process natural gas to produce synthetic liquid fuels that are similar to petroleum-derived products, even with better quality so that they can reduce the portion of petroleum; both as a source of energy and as other industrial raw materials. Using Gas to Liquid technology, Natural Gas can be turned into Fischer-Tropsch synthetic fuel /FT Diesel. The FT Diesel specification matches the quality of petroleum-based diesel fuel. FT diesel is the most promising fuel as the quality requirement of diesel fuel is strengthened in the future, and it is urged to introduce FT diesel at an early date to make the most of its character of being environmentally clean while attempting to secure its demand base and creation of demand for the product in the future. This paper presents the feasibility of GTL technology implementation to monetize stranded gas, which is assessed using the wellhead netback price of gas as a feasibility indicator. The netback price is calculated using the price of fuels to be substituted by diesel (in this case, Solar) as references. The basic question of this study is the minimum gas price at the wellhead that satisfies the GTL project investor's economic criteria when the gas is converted to GTL, and the GTL is to substitute solar consumption. The minimum acceptable rate of return (MARR) is set at 16% as an economic criteria evaluation. In addition to feasibility analysis, this study also evaluates Indonesian regulatory viability for GTL development, including its product and benefits to the nation, as well as its implementation risk.