Energy
From The Report: Indonesia 2014
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The nation’s vast territorial expanse and established presence of experienced, well-financed international and domestic oil firms has led to the discovery and exploitation of a succession of sizeable oil and gas projects across the country for more than 125 years. As of 2013, Indonesia’s total hydrocarbons reserves reportedly included 3.7bn barrels of oil and 103.3trn cu ft of natural gas. In 2012, 96 new exploratory wells were drilled across the country – 55 onshore and 41 offshore – up from 81 exploratory wells drilled in 2011. Indonesia ranked fifth in the world in terms of total liquefied natural gas exports, behind Qatar, Malaysia, Australia and Nigeria. The growing shortage of domestic petrol production capacity will see Indonesia surpass the US as the world’s largest importer of petrol by 2018. Exploring and exploiting new oil and gas fields – including more expensive plays such as shale gas, deepwater and frontier resources – will be increasingly important for both exports and the growing domestic market as maturing legacy fields continue to decline in productivity. The success of these efforts relies not only on the technical capabilities of the oil and gas operators in the country, but also on the creation of a stable regulatory framework to support investor confidence.
This chapter contains interviews with Karen Agustiawan, President Director, Pertamina; and Nur Pamudji, President Director, Perusahaan Listrik Negara; and an energy roundtable with Andhika Anindyaguna, CEO, Sugih Energy; Jon M Gibbs, President, ExxonMobil Indonesia; Lukman Mahfoedz, President, IPA and President Director, Medco Energi; Roberto Lorato, President Director, Premier Oil Industries Indonesia; and Hardy Pramono, President and General Manager, Total E&P Indonesia.

Articles from this Chapter

Overview

Diversification under way: Hydrocarbons remain a key contributor to the economy, but the energy mix is steadily broadening
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The nation’s vast territorial expanse and established presence of experienced, well-financed international and domestic oil firms has led to the discovery and exploitation of a succession of sizeable oil and gas projects across the country for more than 125 years. Lured by attractive production contracts, considerable remaining reserves and strong energy prices, the country more recently has managed to mitigate the decline of its maturing oil fields and even boost overall energy output from 2007…

Analysis

Fuelling growth: With demand surging, the government is adjusting to maintain supply
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Rising domestic consumption brought on by organic population growth as well as increased energy intensity from industrial and economic expansion is fuelling the country’s drive to boost electrical power generation capacity, which is targeted to double in size by 2020. Delivering this new wave of electricity generation will be crucial for the development of Indonesia given the fact that its current installed capacity of around 40 GW ranks it among the lowest in the region, far behind other nations…

Analysis

From the core: Geothermal potential is high and projects are under way
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Already the third-largest geothermal power producer in the world behind only the Philippines and US, Indonesia is counting on tapping into more of this abundant renewable power source to diversify its rapidly expanding power sector. Located along the infamous ring of fire amidst the convening of the Eurasian, Australian, Pacific and Philippine Sea plates, the same geologic forces responsible for the constant menace of earthquakes, tsunamis and volcanic eruptions also provide a powerful and abundant…

Interview

Karen Agustiawan, President Director, Pertamina: Interview
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Interview:Karen Agustiawan How is Pertamina working to reduce Indonesia’s dependence on the usage of conventional oil and gas, and which energy sources will take priority? KAREN AGUSTIAWAN: Priority will given to geothermal sources, because we have the potential to benefit from alternative energy such as biofuels. At the same time, it is important to be realistic about developments within this industry. For instance, over the next decade, oil production will decline to 400,000 barrels per…

Interview

Karen Agustiawan, President Director, Pertamina: Interview
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Interview:Karen Agustiawan How is Pertamina working to reduce Indonesia’s dependence on the usage of conventional oil and gas, and which energy sources will take priority? KAREN AGUSTIAWAN: Priority will given to geothermal sources, because we have the potential to benefit from alternative energy such as biofuels. At the same time, it is important to be realistic about developments within this industry. For instance, over the next decade, oil production will decline to 400,000 barrels per…

Interview

Nur Pamudji, President Director, Perusahaan Listrik Negara (PLN): Interview
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Interview:Nur Pamudji To what extent does Indonesia’s generation capacity match demand? How does PLN plan to expand access to electricity across Indonesia? NUR PAMUDJI: Indonesia has sufficient power supply to meet its demands, including a surplus in Java. In fact, we already have excess capacity of more than 30% in Java and have decided to build two 1000-MW units there. As for additional power projects, PLN is facing some challenges related to land acquisition, but I am confident that…

Analysis

Colouring between the lines: Regulatory challenges remain for sector players
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Promulgated in 2001, Indonesia’s Oil and Gas Law forms the backbone of the sector’s regulatory framework along with various supplementary government ordinances and decrees. While the law ostensibly lays out a clear set of rules governing both state and private sector responsibilities, entitlements, liabilities and all manner of legal obligations, different interpretations of regulations by the state have resulted in uncertainty for the private sector. At their core, production sharing contracts…

Analysis

The price is right: Subsidies for petrol have been costly, but removing them presents new challenges
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With a population of some 240m citizens, Indonesia has long been burdened by the conundrum of providing relatively inexpensive energy to its population at large while at the same time maintaining domestic purchase prices of oil and gas high enough as to remain attractive for upstream operators to continue to search out and exploit domestic reserves. Caught in the middle of these diverging price points is the state, which has been facing an increasingly steep tab for the country’s energy use in…

Interview

Andhika Anindyaguna, CEO, Sugih Energy; Jon Gibbs, President, ExxonMobil Indonesia; Lukman Mahfoedz, President, IPA & President Director, Medco Energi; Roberto Lorato, President Director, Premier Oil Indonesia; & Hardy Pramono: Interview
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Interview:Andhika Anindyaguna, Jon Gibbs,Lukman Mahfoedz,Roberto Lorato,Hardy Pramono Are regulatory changes and stringent anti-graft measures having an impact on investor appetite? ANDHIKA ANINDYAGUNA: We are optimistic about the transition from BP Migas to SKK Migas, as the regulatory body is totally controlled by the Ministry of Energy, establishing a clearer chain of command, as well as a more transparent and accountable regulatory body. This will bring numerous benefits…

Analysis

A balancing act: Government takes action on rising domestic demand for fuel
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With oil and gas imports weighing on its trade balance, Indonesia is taking steps to reduce domestic demand for fuel and boost local refinery capacity. These moves come in the wake of the International Energy Agency (IEA) releasing a 2013 report projecting that energy demand in the South-east Asian country is set to nearly double over the next two decades. Improving The Trade balance Imports of oil and gas from January to August 2013 amounted to $29.9bn, while exports stood at $21.4bn, according…

Analysis

No stone unturned: Exploration for new resources mitigates other supply challenges
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The country’s reliance on natural gas, needed to play an increasing role in meeting both its own energy needs as well as its continued use as a cash-generating export, leaves little doubt that the country will need to use any and all means available in securing new domestic supplies. While there are still substantial amounts of conventional areas to explore throughout the country, recent advances in techniques and technology are fuelling interest in unconventional reserves such as those locked…

Analysis

Trade winds: Hydrocarbons receipts continue to fill state coffers
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Oil and gas commercialisation has been a linchpin of Indonesia’s economic development for more than three decades, accounting for as much as 80% of the country’s annual exports and 70% of its annual revenues since the 1970s. While the country’s economy has expanded and diversified over time, aided by the inflow of foreign currency derived from oil and gas exports, energy exports still provide significant revenue to the government’s coffers as well as private sector investment. The nature…

Analysis

Hydro potential: A growing focus on diversifying the energy mix
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As Indonesia becomes reliant on foreign imports for its petroleum needs, with annual government energy subsidies of Rp200trn ($20bn), the need to commercialise cheaper domestic power sources is becoming key for the country’s economic development. By far the most inexpensive solution in terms of cost per KWh of electricity delivered is hydropower, which currently supplies 10% of the country’s electricity each year. In harnessing the water flow of Indonesia’s abundant rivers, public and private…