The Jakarta Post
The global energy industry, which has been facing new challenges amid climate change and changing customer demands, is taking bold steps to anticipate a megatrend: the shift from fossil fuels to cleaner energy. State-owned energy company Pertamina is responding to this energy transition era by carrying out a business transformation.
The transition to green energy that is happening globally today is driven by global warming resulting from the greenhouse effect and the increase in carbon dioxide. The use of hydrocarbon for industrialization, on the other hand, has resulted in oil and gas depletion.
Pertamina, the biggest oil and gas company in Indonesia, strives to achieve energy security. Besides building and revitalizing refineries, it has also developed refineries that convert biomass into energy, also known as oil palm-based biorefineries.
In July last year, Pertamina made great strides in a trial for the production of D100 Green Diesel utilizing 100 percent palm oil with an amount of 1,000 barrels per day at the Dumai Refinery in Riau.
PT Pertamina President Director NickeWidyawati remarked that the environmentally friendly D100 had become Pertamina’s commitment to realizing thegovernment’sNawacitainitiative, that is to optimize the use of domestic natural resources for national energy security, self-sufficiency and sovereignty.
Moreover, the company also aims to test its biorefinery in Cilacap, Central Java, in the coming years. The Cilacap refinery is expected to produce 3,000 barrels of biofuel each day, and in 2022 it will increase to up to 6,000 barrels per day. In 2023, the oil company will build a biorefinery with a capacity of 20,000 barrels per day in the Plaju refinery in South Sumatra.
The process of turning palm oil into green gasoline by Pertamina is the first one to be carried on an operational level. In the past, this was only done in the laboratories for paper research.
This method was presented at the Global Biofuel Summit in Singapore last year and received a positive response. Pertamina will keep carrying out testing to optimize its green gasoline technology. It will publish its latest research on the technology on international forums and journals.
In his state address on Aug. 15, 2020, President JokoWidodo hailed the big endeavor to ensure self-sufficiency in energy supply. The President expressed appreciation for Pertamina’scollaboration with researchers from the Bandung Institute of Technology (ITB) to produce a ‘red and white’ catalyst as the primary component for producing D100 to absorb at least 1 million tons of palm oil produced by farmers per day.
Pertaminahas successfully implemented the mandatory B30 biodiesel program standard. B30 is a biodiesel with a 30 percent fatty acid methyl ester (FAME) content and 70 percent diesel. Implementing B30 has yielded positive multiplier effects, such as saving the country’s foreign exchange reserves, reducinggreenhouse gas emissions (GRK), increasingemployment and reducing reliance on diesel imports.
The global and national trends in the energy sector
Path to cleaner energy: State-owned oil and gas giant Pertamina strives to achieve energy security and carry out a business transformation to anticipate a megatrend in the energy sector. (./.)
The history of global energy trends can be seen from the economic conditions over the past centuries.
In the mid-19th century, the Western economy was characterized by industrialization growth. At that time, biomass was the dominant source of energy. In the next decades, there was an expansion of global and local transportation, which drove energy demand across the globe.
Then, in the second half of the 20th century, when oil was produced and distributed widely, the West enjoyed an unprecedented economic boom and improvement in the standard of living, which they had never seen before. In the early aughts, the economy was soaring in China thanks to its rapid industrialization, resulting in increased energy demand.
However, in the past few years, renewables have shown feverish growth in the electricity-generation mix and are expected to keep growing in the coming decades. Furthermore, digital innovations, which will transform the entire energy value chain, are expected to help optimize grid integration and push renewable energy.
Primarily driven by the penetration of new and renewable energy sources into the energy mix, global fossil fuel growth is expected to peak in 2030. Renewable energy is projected to make up 14 percent of electricity generation in the same year.
The megatrends in the energy sector at the global level also have a big impact on national energy.
Global oil demand is predicted to peak by 2033 as electric vehicles gain rapid momentum. Globally, annual sales of electric vehicles can exceed 100 million by 2035. In Indonesia, the oil demand is expected to grow but slower, and the peak of oil demand for road transportation is expected to take place in 2033. In addition, electric two-wheelers will be a popular option of transportation in the coming decades.
The chemical sector will account for more than half of oil demand growth in the next 15 years globally. Petrochemical demand will be shifting to Asia. Meanwhile, Indonesia will see the oil demand in chemicals increase fivefold, from 70,000 barrels per day (KBPD) in 2017 to 350+ KBPD in 2035.
The gas industry is expected to grow steadily until 2035. The gas demand will be increasingly met with liquefied natural gas. If Indonesia cannot monetize new domestic resources at economic prices, Indonesia will shift from a net exporter to a net importer by 2028.
Globally, electricity consumption will double by 2050, and renewables will share over 50 percent of energy generation by 2035. In Indonesia, the electricity demand is expected to increase more than double by 2035. Operating coal plants will continue to supply the majority of power for most regions across the country. However, gas renewable energy is projected to increase.
Currently, the oil industry has recorded oil demand growth at around 2 percent. The demand is expected to go weaker by 2033 as the growth of road transportation, industry and power generation will slow down. The chemical and aviation industries are projected to continue to increase in the coming years.
Moreover, electric vehicle penetration will be driven by electric two-wheelers, potentially reaching up to 25 million vehicles by 2035, according to the 2020 McKinsey Energy Insights’ Global Energy Perspective.
The electric vehicle market is expected to grow at a 60 percent rate per year, driven by electric two-wheelers first and followed by passenger cars. By 2035, almost 25 million electric vehicles will populate the roads, including more than 100,000 city buses and nearly 100,000 urban and regional trucks. Electric vehicles will reach more than 10 percent penetration with buses, two-wheelers and passenger cars by 2035.
Pertamina constantly develops new and renewable energy to respond to the fossil-based energy depletion.Pertamina has upped the use of gasto replace oil as a transitional solutionon the way from conventional fossil fuel energyto new and renewable energy. The step has been taken in response to the government’s request for gasification power plants.
Meanwhile, Pertamina has also tapped into the great potential of domestic geothermal reserves. As the country with the third-biggest geothermal reserves, Indonesiahas between 28 GW and 30 GW of the clean energy source. Pertamina, which has realized 1,877 MW in power generation from geothermal sources, will continue to develop this renewable source for energy production.
How oil companies are adapting to a changing industry
Utilizing local resources: Pertamina seeks to improve petrochemical products and develop domestic resources, including biofuels like crude palm oil. (./.)
International oil companies have responded differently to the global megatrend. Among them is by focusing on resources from shale, which is abundant in America, along with running projects from other conventional sources. The approach allows companies to focus on short-cycle unconventional resources while at the same time selecting high-return conventional projects, like petroleum. This method has been adopted by Chevron, Exxon Mobil and Conoco Phillips.
Another approach is a streamlined portfolio, in which companies use efficient oil and gas assets, such as liquefied natural gas and deep water oil projects, with additional investments in renewables.
Some big oil companies opt for focusing on cleaner energy and increasing diversification in new energy sources. The method will enable a strategic shift to gas in the exploration and production sector and allow companies to make strong investments in low carbon energy. Among the companies that adopt this approach are BP and Shell.
Pertamina, on the other hand, has taken its own approach in adjusting to the increasing adoption of cleaner energy. The state-owned oil and gas company has focused on the utilization of energy sources from within the country in an attempt to boost the domestic market. It has committed to increasing capacity in upstream, refinery, petrochemical and supply chain infrastructure. The company also seeks to improve petrochemical products, as well as develop domestic resources, including biofuel like crude palm oil, in the downstream segment.