LNG in Indonesia wasted, LPG imports prioritized. Oil import mafia still too powerful?

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Salamuddin Daeng Economic Expert from the Indonesian Political Economy Association (AEPI)

IO – More than seven billion kilograms of liquid petroleum gas (LPG) is subsidized every year by the government. The LPG subsidies have totaled more than IDR 69 trillion in the state budget with LPG being the most heavily subsidized – more than diesel, kerosene, and electricity.

This is despite the fact that most LPG is imported. More than 70% of LPG consumed by Indonesians is imported. Indonesia is also one of the largest LPG importers in the world, sitting at ninth place. Most LPG imports come from the Middle East. LPG is a derivative of oil. The largest producers and exporters of LPG in the world are Saudi Arabia, Qatar, and the U.S.A. All of the largest oil producers are also the largest exporters of LPG.

LPG has been prioritized by the government in an attempt to reduce kerosene imports. The switch from kerosene to LPG is being done on a massive scale by the government. This can be seen by the two-fold increase of LPG subsidies compared to in 2012. This is despite kerosene to LPG consumption just replacing one imported energy source to another.

As a result, Indonesia has become one of the largest consumers of LPG, ranking 13th in the world. Per day, Indonesia consumes more than an equivalent of 160 thousand barrels of oil of LPG.

This is even though Indonesia has another energy source: liquid natural gas (LNG). Indonesia is one of the largest producers of LNG in the world. However, this has seemingly gone to waste as the it has not been properly developed. LNG has ostensibly been ignored amidst the rise in national energy consumption. Is this being done on purpose? Is this a part of the oil import mafia’s game?

Indonesia is one of the largest LNG exporters in the world alongside Qatar, Australia, Malaysia, Nigeria, and Russia. If the Masela Block gas plan is truly to be realized then Indonesia would become the largest LNG exporter in the world.

As a country with such a large reservoir of natural gas, Indonesia should prioritize the production of LNG for its national energy consumption needs. However, LNG has instead been prioritized for export. An energy source which is cleaner and more environmentally-friendly should be used on a massive scale for powerplants, industry, transportation, and household needs. Certainly, this must be supported by adequate research, development, and infrastructure building. It must also be supported by the correct government policies and should receive a significant portion of the state budget. Unfortunately, this isn’t the case. Could that be because the oil import mafia still rules Indonesia?