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Jakarta Post

Oil crisis eases but energy challenges remain

The latest world oil price fluctuations have apparently died down

Erkata Yandri (The Jakarta Post)
Kanagawa, Japan
Mon, June 13, 2011

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Oil crisis eases but energy challenges remain

T

he latest world oil price fluctuations have apparently died down. The crisis, triggered by political turmoil in some oil producing countries, worried Indonesia, as a net oil importer, but it rode its luck.

If only the winter prolonged and Japan were unaffected by the earthquake and tsunami the situation would have been different.

However, the latest oil crisis, at least, was enough to give the Indonesian government a jitter. There is, however, a semblance of fear that another crisis may strike. The toughest challenge facing the country today is to meet the oil lifting target of 970,000 barrels per day and the mounting burden of fuel subsidies, which could not be phased out until now for various reasons, at the expense of development capital.

Every time an oil crisis hits, the government’s attitude has taken an ambiguous stand. On the one hand it had no guts to increase fuel prices, but on the other it wanted to reap profits from the oil sales and royalties. Arguably, the government’s mind-set is pegged to oil.

Based on 2010 data released by British Petroleum, Indonesia’s oil reserves will last for the next 11 years. The more the oil is pumped, the faster the reserves will run out. If the current situation persists until 2025, then 75 percent of national fuel demand will need to be imported.

Fossil fuels will remain atop the national primary energy mix, accounting for about 41.7 percent. The figure is twice as high as the national target of 20 percent stipulated in Presidential Decree No. 5/2006 on national primary energy mix.

Without having to be pessimistic or skeptical, the way the government deals with energy problems will keep the country from its 2025 target. Not to mention the fact that 60 percent of fuel consumption goes mostly to transportation and power generation.

With the development of rapid and mass transportation and gas supply for power plants lacking, the primary energy mix target will remain a dream. What kind of planning has been in place?

Anticipatory efforts aside, the government seems not serious about meeting the oil lifting goal. It is still struggling to meet oil needs without balanced endeavors to reduce oil dependence. Focus and vision to ease oil dependence have been somewhat blurred.

This is apparently evident in the lackluster efforts of the upstream oil and gas authority or BPMigas in achieving the national oil and gas production target. Without looking for a scapegoat, obviously the weak oversight and communication between BPMigas and the Energy and Mineral Resources Ministry are key problems. Discrepancies over technical and nontechnical issues between the two have often been revealed publicly. Bureaucratic confusion and frequent unplanned shutdowns are some of the results of the lack of coordination between the two.

In a bid to reduce oil dependency, the government has introduced a series of national energy-saving programs, including Presidential Instruction No. 10/2005 on energy conservation. The problem rests with implementation.

To address the energy problem, there are two things that the government has to do. First, it must settle the oil lifting target as soon as possible. The government does not need to waste time by looking for individual or institutional problems, but analyze the matter based on the existing system.

The system is supposed to quickly anticipate deviations, such as unfulfilled production targets, and provide immediate corrective actions based on analysis of data gathered from the field.

In the case of an unplanned shutdown that caused a loss of 33,000 bpd, both the Energy and Mineral Resources Ministry and BPMigas could actively monitor exploration and exploitation activities by taking advantage of advanced information and communication technologies.

Second, the government should divide its focus into energy efficiency (EE), diversification of energy (DE) and renewable energy (RE) to pave the way for energy security. If the government fails to prepare for energy security now, the impacts of oil price shocks will continue.

Keep in mind, EEDERE is not the sole responsibility of the Energy and Mineral Resources Ministry, but should be reflected in the policies of other ministries. Apart from supporting energy security, EEDERE will create economic opportunities, which could provide jobs in R&D, manufacturing, consulting, engineering, construction, installation, maintenance and other areas.

The recent oil price crisis should serve as a challenge for Indonesia to take energy problems more seriously. With abundant potential in natural and human resources, there is no excuse for Indonesia not to realize its long-term energy vision. The key is willingness to change, synergy and coordination, and, of course, full public support.

The writer is a researcher at the Solar Energy Research Group, Vehicle Systems Engineering Department, School of Creative Engineering, Kanagawa Institute of Technology, Japan.

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