Energy Situation in Indonesia

2.1. Indonesian Energy Sources Production Conditions

Indonesia is the fourth most populous country in the world. In 2020, the population is 270.20 million people (BPS 2020), with 80 percent concentrated in Java, Bali and Madura (IAE 2018). Indonesia, in reality, is abundant in natural resources, as evidenced by its vast oil, natural gas, and coal deposits and lifting. However, given the country's vast population, Indonesia's energy resources are not as great as they appear, as oil, natural gas, and coal reserves are depleting and will likely not last for more than 40 years, unless new proven energy resources are discovered (IBRAHIM 2006).

Indonesia is a crude oil exporter as well as a crude oil importer. It is the first in East Asia among natural gas exporting countries, third globally among coal exporting countries, and first in Southeast Asia among oil importing countries. Despite this, the number of confirmed oil reserves and lifting is decreasing (KURTUBI 2011).

Like other emerging markets, Indonesia's energy consumption has also experienced a rapid increase. Data shows that Indonesia's energy consumption percentage increased by an average of 2.6% per year from 99 Mtoe in 1990 to 240 Mtoe in 2017. Indonesia's primary energy consumption has steadily increased, from 0.71 tons of oil equivalent (toe)/capita in 2010 to 0.76 toe/capita in 2015 or growing by 1.5% per year. This trend is projected to continue to

132 increase and requires the government to prepare related policies to ensure energy supply meets domestic needs (WINANTI et al. 2020).

Despite being a country that produces various forms of energy sources, Indonesia relies in particular for most of its energy fulfilment on fossil energy sources, such as oil, natural gas, and coal. According to data from the Ministry of Energy and Mineral Resources, 91.45 percent of Indonesia's energy needs in 2018 were supplied from fossil energy sources. This degree of dependence on fossil energy sources is expected to continue to increase. However, in recent years, the Indonesian government has begun to push for a shift towards meeting energy needs from renewable energy sources (KEMENTERIAN ENERGI DAN SUMBER DAYA MINERAL 2018).

2.2. Energy situation: crude oil, natural gas, coal and new and renewable energy

Indonesia's petroleum resources can be said to be very limited and have been widely used. According to data from the SKK MIGAS annual report (2016), for example, it shows that 92.1% of total reserves have been utilized. In particular, Indonesia's petroleum reserves in 2016 were 7,251.11 million stock tank barrels (MSTB), or decreased by 0.74% compared to the previous year. The current oil production is 338 million barrels per year. Considering the existing, proven oil reserves, it is estimated that proven oil reserves will be exhausted within the next nine years.

In the past, Indonesia was known as one of the largest producers of fossil fuel energy in the world, especially oil. However, this condition has changed along with the declining capacity of oil production and the increasing need for petroleum consumption in the form of fuel oil (Bahan Bakar Minyak/BBM). Since 2004, Indonesia has even been known as a net oil importer; in aggregate, the government must import petroleum to cover domestic energy needs (especially in fuel) (PWC INDONESIA 2018). EIA (2014) noted that Indonesia imports more than 441,000 barrels/day of oil. Most of these imports come from Saudi Arabia, Nigeria, and Azerbaijan. In a smaller percentage, several other countries are also sources of Indonesia's petroleum imports, namely Malaysia, the United Arab Emirates, Brunei Darussalam, and Angola. This need to import oil is closely related to the lack of oil refinery capacity in Indonesia. As a result, most of the imports are in the form of gasoline for vehicles, gasoil for power plants, liquid petroleum gas (LPG) for households, alternative fuels for aircraft (AFTUR), and diesel for vehicles and engines.

Interestingly, Indonesia continues to export petroleum even though it has become a net importer of total oil. This is due to the need to maintain market access and state revenue from

133 oil production. In 2014, EIA reported that Indonesia's oil exports reached 381,000 barrels/day, and most of these exports were destined for countries in the region, such as Japan, Australia, Thailand, and China. However, oil exports are projected to continue to decline until reserves are exhausted by 2035. On the other hand, petroleum imports are projected to continue to increase to meet Indonesia's energy needs. BPPT data (2018) shows that oil fuel imports reached 22.9 kiloliters (KL) in 2016 and will increase by 6.3% growth per year to 182.3 million KL in 2050 (EIA 2014).

Like oil, natural gas reserves also decreased compared to 2017 by 5.04% (BPPT 2018).

Nevertheless, Indonesia's natural gas reserves can be categorized as still quite significant. In 2015, EIA noted that Indonesia had natural gas reserves of 103.4 trillion cubic feet (tcf), and with this amount, Indonesia ranks13th largest in terms of natural gas reserves in the world and the second largest in the Asia-Pacific region.

Based on SKK MIGAS (2016) records only 34.5% of total natural gas reserves have been produced, implying that the opportunity for natural gas production is bigger than for oil.

Nevertheless, there is a trend for a rising consumption of natural gas in Indonesia. EIA notes that domestic demand for natural gas has doubled since 2005. This makes it likely that gas exports will decrease in the future.

Indonesia's total coal resources up to 2015 were estimated at 127 billion tons, of which an estimated 32.3 billion tons were proven coal reserves (DITJEN MINERBA ESDM 2015).

The majority of these coal reserves are characterized as low to medium rank (i.e. calorific value) and are mostly sourced on the islands of Sumatra (50 per cent) and Kalimantan (49.5 per cent), while the rest are scattered on other islands.

National coal production is projected to continue to increase. Although initially intended as an export commodity, national coal production has gradually led to meeting domestic needs, especially to meeting the needs of steam power plants (PLTU) and several industries, such as cement, textiles, steel, etc. It was recorded that in 2016, the share of Indonesian coal production exported was 79% and this is projected to continue to decline to 9% by 2050. At the same time, imports of certain types of coal needed by industry are projected to increase from 4 million tonnes in 2016 to 11 million tonnes by 2050 (DITJEN MINERBA ESDM 2015).

Indonesia's potential for new and renewable energy (NRE) is quite large and consists of various sources. However, the potential of these various NRE sources has not been optimally harnessed due to various constraints such as geographical location and very high investment costs. Currently, the use of renewable energy is dominated by hydropower, especially in hydroelectric power plants (PLTA). In addition, other sources of NRE that are produced in

134 limited quantities are biomass, geothermal, and biodiesel. On the other hand, the development and utilization of other renewable energy sources such as solar energy, wind, uranium, ocean waves, and tides are still very limited in Indonesia (DITJEN EBTKE 2016).

2.3. Energy Consumption Projection Map

Along with Indonesia's economic and population growth, demand for national energy is also projected to increase. The projection of domestic energy growth from 2016-2050 shows that final energy demand will increase by 5.3% per year. This will manifest itself in an increase in energy demand from 795 million barrels of oil equivalent (BOE) in 2016 to 4,569 million BOE in 2050. By 2050, the largest form of final energy consumption by energy source will be fuel, at 40.1%, followed by electricity at 21.3%, gas at 17.7%, coal at 11.0%, and the remaining LPG, biofuels (BBN), and biomass at each below 4% (BPPT 2018).

When viewed in terms of energy utilization by sector, data from the Handbook of Energy and Economic Statistics of Indonesia (2018) indicated that the industrial sector ranked as the highest energy-absorbing sector in 2008, with a consumption of 320,302,447 BOE. However, the pattern of energy consumption in this sector fluctuated with a relatively small upward trend.

In 2018, the industrial sector only absorbed 334,446,969 BOE. This stands in contrast with the transportation sector, which in 2008 contributed to the energy consumption of 185,668,882 BOE, experiencing a significant increase in 2018 to reach 391,397,487 BOE. This made it the largest contributor to Indonesia's energy consumption sector, beating the industrial sector. In addition, the household sector always ranks third, and the commercial sector ranks fourth in terms of Indonesia's energy consumption (KEMENTERIAN ENERGI DAN SUMBER DAYA MINERAL 2018).