Indonesia towards Gas and LNG A glimmer of hope to achieve Net-Zero Emissions

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Pertamina
(Source: Pertamina)

As much as 64.3% of Indonesia’s gas production in 2021 was used to meet domestic needs, with total gas distributed being 5,734.43 BBTUD. Of this amount, 27.45% is for industrial needs, exports in the form of LNG are 22.18%, fertilizers are 12.08%, exports are 13.14%, and electricity is 11.90%. Indonesia also utilizes gas for domestic LNG, and LPG needs 8.56% and 1.56%, respectively. A small portion of the remaining consumption is for city gas and gas for transportation fuel. Regarding LNG exports, Indonesia exports LNG to several countries, with a total export volume of 459.55 million MMBTU in 2021. For upstream LNG, China is the largest importer of Indonesian LNG with a volume of 251.82 million MMBTU, followed by the Republic of Korea at 80.23 million MMBTU and Japan at 63.76 million MMBTU. Meanwhile, downstream of LNG, Indonesia exports a total of 110.98 million MMBTU, with the main destinations being Japan, the Republic of Korea, and Taiwan. 

To encourage more upstream investment in Indonesia, the government has made several breakthrough policies, such as contract flexibility, where investors can choose production sharing contract (PSC) cost recovery or PSC gross split schemes, improved terms and conditions in the offering of oil and gas working areas, and improved incentives, both fiscal and non-fiscal. Examples of fiscal ones being online permit application and adjustment of non-conventional oil and gas regulations. Note that the Government of Indonesia has developed natural gas infrastructure throughout the region. As an archipelagic country, infrastructure development is a challenge, especially in eastern Indonesia, which has small remote islands. In western Indonesia, existing pipelines, mini-LNG regasification, LNG plants, and FSRU have been built. Currently, pipelines are also being constructed that connect almost every region in Sumatra and Java with transmission pipelines. In the eastern part, the Government plans to develop floating storage and regasification unit (FSRU) and mini-LNG regasification. Also, there is a program for converting diesel to gas power plants in 33 locations, with a total capacity of 1,198 MW and gas needs of 83.74 BBTUD. 

From the perspective of producing countries, it is crucial to emphasize the importance of increasing natural gas investment, both upstream and downstream, to ensure supply security and, furthermore, to stabilize the gas market. This can be achieved, among others, through policies that create a better investment climate. It is also essential to develop more infrastructure to increase the utilization of natural gas. More financing and investment are needed to expand infrastructure development. Indonesia realizes that stabilizing the global gas market requires cooperation from all parties, including producers, consumers, investors, and other stakeholders. It is hoped that all parties can collaborate in finding short-term solutions to the current global gas crisis. 

The energy transition, which is the world’s longest strategy in reducing GHG emissions to achieve NZE, is a potential for new economic growth, given the large number of investments that will enter and absorb local workers and industries. Energy transition should provide benefits, not burdens. The energy transition must be prepared, including mitigating the costs needed, as well as the impacts that can be caused. For example, if there is no energy transition, then industries in Indonesia will be subject to a carbon tax. This results in uncompetitive production costs, leading to the industry’s collapse. Meanwhile, industries that are foreign brands may move their factories to other countries with more potential. 

The three main energy transition issues discussed are accessibility, technology, and finance. Indonesia must provide access to the community, which is why it is crucial to support infrastructure. Reliable and competitive technology needs to be developed. The G20 countries, which contribute to 80% of the world’s economy, are expected to support this transition process. Indonesia has set an NZE target in 2060. Meanwhile, other countries vary, such as in 2050 or 2070. This target is adjusted to the situation and conditions of each country. 

The government emphasizes how,, energy transition actions must be carried out fairly and have a minimal negative impact on society. As part of the energy transition, the government of Indonesia must encourage greener industries. For example, a green industrial area will be built in North Kalimantan. This requires the role of private investment and contributions, philanthropy, as well as innovative forms of funding that can commit to funding of US$100 billion per year from developed countries for developing nations for the energy transition. The G20 presidency is very important for Indonesia as a global country that plays a vital role in supporting clean energy and the world’s climate. 

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The shift from coal to gas and eventually to new and renewable energy will need significant funding support. Accelerating the energy transition in Indonesia requires an investment of up to USD1 trillion by 2060 for NRE generation and transmission. Financial needs are increasing, considering Indonesia will implement early retirement of coal-fired power plants in coming years. The amount of funding requires mobilizing all financial sources, from both private and public companies. Cooperation and collaboration among all renewable energy stakeholders, including public-private and business-to-business partnerships, have a vital role to play in ensuring that all the potential of renewable energy is utilized. 

The energy transition is a long process that must be carried out by countries in the world to reduce carbon emissions that can cause climate change. The agreement in the energy transition aims to reach the same point, namely, the use of clean energy that continues to increase. Hence, let’s be optimistic that Indonesia will achieve NZE in 2060 or even sooner.