Indonesia Energy (In)security

1. Indonesia Energy (In)security Regional Workshop on Energy and Non-Traditional Security RSIS’s Center for Non Tradition Security Studies Singapore, 28 – 29 August 2008 Fabby Tumiwa Institute for Essential Services Reform

2. Role of Energy Resources National Development National & Local Revenue Energy and Fuels for Economic Activities Raw Material for Industrial Processes Stimulate Multiplier Effect Energy Resources

3. Fuel Shortages…… • Energy provision has worsened since the economic crisis in 1997. • Fuel shortage has occurred since 2000 and widespread to all provinces. • In the last 3 years, fuel shortages get more frequent and often, including LPG. • Demand for fuel increased rapidly, so does the energy subsidy • Problem with fuel supply management, fuel distribution and fuel subsidy • Emerging of “Energy Insecurity” throughout the country

4. Fuel Shortage…..

6. Lights Out…. • Power shortages have occurred more frequent and widespread to all region since 1997 economic crisis. • Increasing number of critical system (shortage of supply) areas • Power generation shortages: PLN is unable to make sufficient investment in generation and T&D infrastructures to cope the growing demand. • Fuel disruption and fuel shortages: Supply of primary energy to PLN’s generators • Technical issues: power plant’s derating capacity, maintenance & service problem, etc • Non-technical: seasonal, natural calamity, etc

8. Measuring Energy Security (1) APERC’s Energy Security Indicators: • Diversification of energy supply sources; • Net energy import dependency; • Non-carbon based fuel portfolio; • Net oil import dependency and Middle East oil import dependency. Source: APERC, 2007

9. Measuring Energy Security (2) Derivative of issues: • dependency on Fossil Fuel (Oil and Natural Gas) • deteriorating energy infrastructure • policy & institutional coordination to enhance energy security in domestic level • Climate change control: GHGs mitigation

10. Primary energy dominates by fossil fuel 1970 Oil : 88% Natural Gas: 6% Coal: 1% Hydro: 5% Geothermal: 0% 2006 Oil : 47% Natural Gas: 22% Coal: 23% Hydro : 2% Geothermal: 5% Source: DGEEU, 2005, MEMR, 2007

11. Huge potential of renewables but…. Source: MEMR 2007

12. Conventional energy resources are limited Source: MEMR (2008)

13. Becoming net oil importer Source: EIA (2006)

14. Leading in natural gas export Source: EIA (2004)

15. The world's no. 1 coal exporters Source: Coal Business Association (2008)

16. Energy exporter and importer Export of Primary Energy Export of Final Energy Source: MEMR 2007

17. Import of Final Energy Export of Final Energy Source: MEMR 2007

18. Challenge to Energy Security (1) • Oil and Natural Gas dependent • High dependency to oil, likely continue for the next two decade. • Domestic oil production can not supply domestic demand. • One-third of oil demand is supplied by import from Africa, Middle East and Australia, both crude and refine oil. • Natural gas for petrochemical industry are imported from middle east (Qatar).

19. Challenge to Energy Security (2) • Insufficient and Deteriorating of energy infrastructure • Oil infrastructure • Lack of refinery capacity: aging refinery capacities, no additional plant since mid 90s, • Lack oil storage and distribution networks • More than 40 percents import oil to supply domestic oil demand. • Unreliable distribution systems and expensive distribution cost.

20. Challenge to Energy Security (3) • Cont • Natural Gas infrastructure • Poor domestic gas infrastructure in Java • Gas shortages for electricity and industry • Coal infrastructure • Insufficient coal terminal • Deficiencies of coal transport system • Electric power generation and T&D network • Shortages in power generation • Deteriorating condition of Java-Bali interconnection • Bottleneck of transmission network • Saturated distribution network (in Java)

21. Challenge to Energy Security (4) • Policy framework and institutional coordination • Decentralization makes policy coordination in local-national level is more challenging. Similar to policy coordination among ministries and agencies in higher level. • Local government poor understanding on energy security concern. Policy and actions based on high resources exploitation to raise more revenue for local budget requirement. • The new law on Energy needs strong implementing regulation to ensure energy security at local and national level. • Future energy policy will be determined by National Energy Council

22. Challenge to Energy Security (5) • Climate change control: GHGs mitigation • External pressure to energy trading policy and priorities • Voluntary commitment along with international negotiation • Opportunity from carbon market

23. Some implication • Dependent to foreign oil supply, vulnerable to oil market volatility, and price fluctuation • Increasing cost of supply and subsidy, adding to fiscal burden. • Encourage smuggling and illegal deposit. • Creating vicious cycle on subsidy control that lead to the scarcity of fuel. • Furthermore, creating energy insecurity, and political instability, and economic downturn

24. Enhancing Energy Security • Establishment of a comprehensive energy policy framework & strengthening institution’s coordination • Long term energy resources management • Building sufficient and robust energy infrastructure to enable domestic energy distribution and utilization • Enhancement of transfer of advance energy technologies • Developing and enhance utilization of alternative energy/fuels, improve non-carbon energy portfolio

25. energy Inderdependence in the region Possible but…… • “my country first” paradigm • Demanding costly physical infrastructure (e.g. trans ASEAN natural gas pipeline, trans ASEAN electricity grid) • Different among countries: • market mechanism (e.g. pricing policy) • environmental standard • energy technology deployment • Who control the energy resources?

26. Conclusion (1) • Indonesia faces big challenges to ensure energy security from the supply and demand side. • Review of situation of energy provision for a decade suggested that Indonesia is in situation of energy crisis that has dire consequences to the economy. • High dependency on oil and natural gas, and deteriorating in energy infrastructure jeopardize energy security present and in the near future. • Immediate response by taking measures and action to reduce oil and import of oil, improve non-carbon based portfolio to diversify energy supply, develop critical infrastructure for domestic energy distribution and utilization, and implement integrated resource planning and long term energy management, are extremely needed to avoid severe energy insecurity in near future.

27. Conclusion (2) • Taking and applying measure to improve energy security of Indonesia may have impact to energy security in other country, in particular for those country that heavily dependent on energy resources from Indonesia (Singapore, Malaysia, China, Taiwan, South Korea). • Energy interdependence concept in the region is possible but with huge challenge: nationalism, infrastructure, market harmonization. • Financing and governance issues are needed to assess further. • Delaying in taking proper responses will result in worsening energy supply that will effect future development of the country.

28. Thank You Fabby Tumiwa is director of Institute for Essential Services Reform (IESR), a non-profit, a public interest oriented think-thank for energy and climate change, based in Jakarta, Indonesia. Email: fabby@iesr-indonesia.org, website: www.iesr-indonesia.org