Indonesia Should be Aware

Indonesia has to prepare a program so that it would not depend too much on other countries for its energy needs in the future.
Once an oil exporting country, Indonesia is now facing the problem of oil reserves depletion. With a daily production of only about 1 million barrels against its consumption of 1.4 million, the energy sector could serve as a time bomb ahead if a solution is not worked out, an oil businessman says.

Therefore, newly appointed Energy and Mineral Resources Minister Darwin Sahedy Saleh must work out an oil self-sufficiency program so that the country would not stay dependent on other countries.



"The new minister needs to find a solution to the energy problem. The preparations for the energy self-sufficiency program should be completed soon while the implementation of the existing programs should be accelerated," Effendi Siradjuddin, chairman of the National Oil and Gas Company Association (Aspermigas), said.

After all the current domestic oil consumption has reached 1.4 million barrels per day (bpd), while 70 percent of which is absorbed by the transportation sector. Indonesia’s oil production is only 1 million barrels per day, and half of the production belongs to foreign companies.

"This means that Indonesia has to import almost 900 thousand tons of fuel oils and crude per day," he said.

Indonesia, once one of the most important oil exporters in the world, has become a net oil importer in recent years due to the continued decline in its crude production.

The country is in dire need of private investment to boost oil and gas output at its aging fields. Its oil production reached a first peak in 1977 at approximately 1.6 million barrels per day, rising from 500,000 barrels per day in only 10 years. Production peaked a second time in 1995, again just over 1.6 million barrels a day.

Since 1995, production has steadily declined and in 2006 was down to just 1 million barrels per day, or roughly a 37.5 percent decline, making the country a net oil importer.

Natural gas has fared better, with production averaging approximately 8.3 billion cubic feet per day, down just 3.44 percent from its peak of 8.7 billion cubic feet per day in 1996.

Early in 2007, the government announced a target of increasing oil and gas production by 30 percent to 1.3 million barrels per day and 8.5 billion cubic feet per day, respectively by 2009.

According to Effendi Siradjuddin, however, Indonesia’s present production is only 1 million barrels per day while its consumption reaches 1.4 millions.

The challenge being faced becomes heavier and heavier because each year Indonesia is also facing a ’crazy’ growth of motor vehicles. Based on Aspermigas data, new motorcycle sales reaches one million units per annum. In the meantime, car sales reaches 500 thousand units annually.

The increase in the number of motor vehicles will automatically increase fuel oil consumption which at present had reached 1.4 million bpd amid the threat of crude price increases to about US$100 per barrels in the coming one to two years.

Unluckily, the Indonesian people, for tens of years, have been so absorbed because they could obtain energy so easily. What then happened was that the growing habit of wasting energy which should have been stopped years ago. "There must be a bold step to break this vicious circle," Effindi said.

Looking at the complexities of the problems Indonesia is facing with regard to the energy sector, Effendi is of the view that a national agenda should be worked out in order to create self-efficiency in the energy sector. The national agenda should involve multi-sectors and parties as well as inter-departmental agencies and in cooperation with businesses and academicians.

With the energy sector becoming a main national agenda, it would no longer become the responsibility of the Ministry of Eenergy and Mineral Resources alone. "By making it a national agenda, the program must be supported by the president," Effendi who is also chairman of the National Oil and Gas Caucus, said.

He said that with the growth of cars reaching 500 thousands and motorcycle 1 million units per annum the fuel oil consumption will also increase. "In this case, the ministry of trade and the ministry of transportation need to cooperate to convert fuel-generated vehicles into electric vehicles. They also need to accelerate the creation of a mass transportation system and prepare fuel-free roads for bicycles and electric- or gas-vehicles in all cities in the country."

In the meantime, coordination with the ministry of finance is also needed to provide fiscal incentives. And what is more important is that the minister for energy and mineral resources should refer the management of the country’s mineral resources to the message of the 1945 Constitution, particularly article 33. This is because most of the oil mining activities in the upstream areas are now dominated by foreigners.

In this case, the energy and mineral resources minister should take a clear stand in taking sides with the national interest and it should be supported by all stake-holders so that the management of oil and gas wells will in stages be taken over from foreigners.

"This will have extra-ordinary multiplier effects. Not to mention if the take-over from foreigners is done in the down stream areas, including supportive industries," he said.