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Published online by Cambridge University Press: 07 May 2025
This article focuses on energy ties to assess the current state of bilateral relations between Japan and Indonesia in the wake of the August 2007 signing of the Japan-Indonesia Economic Partnership Agreement (JIEPA). With ratification by Japan's upper and lower houses expected by July 2008, the JIEPA leaves unresolved arguably the most important issue between the signatories, namely future natural gas exports to Japan. Indonesia seems determined to more than halve its exports to Japan, its best customer, whilst at the same time charging it more for the same supplies that China will also receive. This paper explains the reasons for the new Indonesian policy before briefly assessing a second strand of recent bilateral energy security developments, that of Japanese assistance to secure the Straits of Malacca.
[1] Hal Hill, ‘The Indonesian Economy, ‘Cambridge University Press, 2000.
[2] However, it was not the largest recipient of grant aid. Sugeng Bahagijo, ‘Japanese ODA in Indonesia - a high price for poverty, ‘Reality of Aid Reports 2002.
[3] Ishibashi Katsuhiko, ‘Why Worry? Japan's Nuclear Plants at Grave Risk From Quake Damage, ‘Japan Focus, August 11, 2007.
[4] Energy Business Reports, ‘Asia-Pacific Natural Gas Consumption, ‘Energy Business Daily, August 8, 2007.
[5] Mari Iwata, ‘Tokyo Gas Not Worried Now Over China LNG Plan, ‘Dow Jones Asian Equities Report, August 14, 2006.
[6] ibid
[7] ibid
[8] Energy Information Administration (EIA), ‘Qatar Country Analysis Brief, ‘EIA, May, 2007.
[9] The spot market or cash market is a market in which goods are sold for cash and delivered immediately. The spot energy market allows producers of surplus energy to locate buyers fast, quickly negotiate prices and rapidly deliver to the customer. Prices tend to be higher on the spot market, making it a more costly way to buy energy. For LNG it refers to short-term deals or the sale of one cargo.
[10] Argus Global LNG Monthly Average Prices, 2007.
[11] APS Review Gas Market Trends, ‘Indonesian LNG & Pipeline Gas Exports Decline, ‘March 14, 2005.
[12] Japan's share of Indonesian LNG exports has been falling since Jakarta diversified its customer base. For example, in 2004 Japan received 16.3 MT from Indonesia, around 30% of her LNG imports, with 5.3 MT also going to South Korea and 4 MT to Taiwan, some 26% and 63% of their imports respectively.
[13] ibid
[14] Grace Nirang and Christian Schmollinger, ‘Dwindling gas fields undermine Indonesia, ‘International Herald Tribune, August 9, 2006.
[15] Bill Guerin, ‘Indonesia's brewing power struggle, ‘Asia Times, July 13, 2006.
[16] CIA World Factbook 2007.
[17] Bill Guerin, ‘Indonesia's natural gas dilemma, ‘Asia Times, July 22, 2003.
[18] Xinhua, ‘Indonesian fuel subsidy soars amid oil price rise, ‘Xinhua, November 5, 2007.
[19] Muklis Ali, ‘Indonesian LNG exports to fall 4 pct, maybe more, ‘Reuters, November 22, 2007.
[20] Eric Watkins, ‘Indonesia's LNG exports to increase this year, ‘PennWell Oil & Gas Journal, April 24, 2008.
[21] Bloomberg, ‘Indonesia to get record price for LNG, ‘Bloomberg, April 1, 2008.
[22] APS Review Gas Market Trends (2005).
[23] Philip Barnes, ‘Indonesia: The Political Economy of Oil, ‘Oxford University Press, 1995. Coincidentally, the Yapen Block production sharing contract (PSC) signed in November 2002 with Continental Energy Corporation to explore for oil and gas off Papua province contains a substantially more favorable production sharing split between with Pertamina than standard PSCs in Indonesia.
[24] ibid
[25] Ika Krismantari, ‘Medco to invest $400m in eight bioethanol plants, ‘Jakarta Post, May 11, 2007.
[26] Ika Krismantari, ‘Japan to buy more LNG from Indonesia, ‘Jakarta Post, August 24, 2007.
[27] ibid
[28] BP Migas, ‘Inpex Plans Four-well Masela Program, ‘Rigzone.com, May 23, 2007.
[29] Kurtubi, ‘Appropriate sale price for Tangguh LNG is imperative, ‘Jakarta Post, June 12, 2007.
[30] Guerin, Bill, ‘Tapping a gas gusher in Indonesia, ‘Asia Times, October 11, 2007.
[31] ibid
[32] Guerin (2003)
[33] Scott Wisor, ‘Japan Firms Cut Sudan Oil Imports, ‘Genocide Intervention Network, November 20, 2007.
[34] Bloomberg, ‘Japan Studies Effect of Possible Sudan Crude Oil Ban, ‘Bloomberg, November 17, 2007.
[35] Mari Iwata, ‘Tokyo Gas Not Worried Now Over China LNG Plan, ‘Dow Jones Asian Equities Report, August 14, 2006.
[36] Energy Information Administration (EIA), ‘International Energy Outlook 2007 - Natural Gas, ‘EIA, May 2007.
[37] David Wood, ‘Japan's LNG Prices: Trending Upwards, ‘Energy Tribune, December 21, 2007.
[38] ibid
[39] ibid
[40] For a less alarmist view see Nazery Khalid, ‘Security in the Straits of Malacca, ‘Japan Focus, June 1, 2006.
[41] Jakarta Post, ‘Japan gives RI three boats to patrol Malacca Strait, ‘Jakarta Post, December 1, 2007.
[42] ibid
[43] ibid
[44] ibid
[45] Yoichiro Sato, ‘Southeast Asian Receptiveness to Japanese Maritime Security Cooperation, ‘Asia-Pacific Center for Security Studies, September 2007.
[46] ibid
[47] ibid
[48] ibid
[49] ibid
[50] See Syed Javed Maswood (ed.), ‘Japan and East Asian Regionalism, ‘Taylor & Francis, 2001.
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