2.2.2. Political Changes and Discontinued Supplies in 2006

In 2006, due to growing domestic demand and lack of upstream investments, Indonesia restructured the gas industry to attract foreign investments. Foreign oil companies operating under PSA (production sharing agreement), however, had to sell at least 25% of oil and gas production locally at regulated low prices [31]. This requirement resulted in low upstream profitability and low investments. Despite restructuring the gas industry, due to lack of investments and consequent lack of gas reserves, Indonesia could not export the promised volumes of LNG under long-term contracts to the East Asian buyers in 2006 [27].
