Early this year, in response to the increase in world oil prices, the government explored ways of reducing fuel subsidies. Several options were considered: restricting subsidized gasoline sales only to public transport vehicles and motorcycles, forcing private passenger cars to use higher octane gasoline sold at market prices or raise gasoline prices.
But no decision has been taken as of the end of the year.
The solution to the oil subsidy problem could be seen from short-, medium-, and long-term perspectives. In the short term, increasing prices is a practical and inevitable option. In the medium term, the current oil delivery system has to be upgraded. For the longer term, fuel oil must be phased out in favor of natural gas though infrastructure for gas transportation and distribution needs to be improved and expanded.
Given the inadequate technical preparations, the government will most likely opt for a fuel price increase next year.
The government started this year to offer blocks for shale gas and CBM (coal bed methane). Recent exploration drillings — particularly in the eastern regions — found larger gas reserves than oil, meaning that we have a strong base of natural gas reserves and that we could move to develop gas to fuel future economic growth.
In the electricity sector, state electricity utility PLN completed several new power generation plants, providing additional power supply, especially outside Java-Madura-Bali (JAMALI) which have long been experiencing electricity crises. The additional power capacity in Sumatra, Kalimantan, Sulawesi and other islands would surely improve the regions’ attractiveness for investments.
But supply capacity for electricity in JAMALI has still grown much larger than that outside JAMALI, resulting in a wider gap between the two parts of the country.
The increase in the average costs of electricity is linked with our primary energy supplies. Therefore, the expensive diesel fuel should be phased out and replaced with natural gas, coal, oil, geothermal, hydro and other renewable energy. The Cabinet reshuffle last October, which, among other things, led to the appointment of the reform-minded Dahlan Iskan to become the minister of state-owned enterprises would hopefully transform leadership and decision making in the energy sector to the one which is more decisive in tackling oil and electricity problems. Dahlan will be able to improve cooperation and coordination among the state-owned energy companies as Pertamina and PLN in delivering energy (the state oil and gas co., gas co., coal co., geothermal co., etc.). Capacity and contribution of those SOEs, as the largest players in the country’s energy business needs to be increased, including for expanding rural access to energy. Securing more gas, geothermal and coal supplies are extremely important to improving the reliability of our electricity system, in which the state-owned energy companies might recover their synergy.
In May 2011 the President in his master plan for “Acceleration and Expansion of Indonesia Economic Development 2011-2025”, included the development of six economic corridors in Sumatra, Java, Kalimantan, Sulawesi, Bali–Nusa Tenggara and Papua-Maluku by implementing 22 new large scale projects and strengthening connectivity between the corridors.
The National Energy Council (DEN) has warned that the long-term economic development plan needs to be supported with additional energy supplies to meet demand, which is expected to increase threefold
by 2030.
It seems that the European economic crisis has not brought major influence to Indonesian energy where efforts are still being focused on increasing access. The accident at the Fukushima nuclear power plant in March 2011, despite its impact that made some countries re-think their nuclear energy policy, did not bring significant impact to Indonesia’s endeavor to study the possibility of developing such a plant in the future.
The new organization, the Directorate General of Renewable Energy and Energy Conservation within the Ministry of Energy and Mineral Resources, has not performed as well as hoped in 2011 after it was established a year before.
In September 2011, President Susilo Bambang Yudhoyono issued Regulation No. 61 on a National Action Plan for Green House Gases (GHG) Reduction, signaling that GHG as a source of global warming are to be combated in a more systematic way. The regulation consists of guidelines on planning, implementing, monitoring and evaluation of GHG emissions reduction for both the national and local level.
This is to follow our commitment during the COP-13 conference (that produced the Bali Road Map for Climate Change) and the President’s speech during G-20 Summit in Pittsburgh 2009 where he pledged 26 percent cut in Indonesias GHG emissions by 2020 (from a “business as usual” scenario, that could be increased to 41 percent if foreign assistance is available).
Reduction of GHG emissions (mostly from fossil fuels) are in line with the principles of prudent energy management. On the demand side, this means that energy conservation efforts (in our transportation, industry, buildings, etc.) are to be applied more seriously by, among others, restriction of subsidized fuel consumption.
On the supply side, there is a new necessity to use cleaner (greener) energy rather than keeping our large dependence on oil and coal. Hopefully, the RAN-GRK would be followed soon in 2012 by publication of its implementing guidelines and progress to serve as a basis toward Indonesia’s greener energy and economy.
Our energy cooperation with the Netherlands, under the umbrella of Joint Energy Working Group entered its 15th year in 2011. While there was no significant energy cooperation progress with ASEAN, 2011 showed new development in our cooperation with Russia.
Many plans for energy and its related sectors were drafted and published in 2011. We hope the plans are going to be implemented accordingly in 2012.
The writer is energy policy analyst with the National Development Planning Agency (BAPPENAS)
